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ECONOMIC  STUDIES 


WORKS  BY  WALTER  BAGEHOT. 

LITERARY  STUDIES.  Edited,  with  a  Prefatory  Memoir,  by 
the  late  Richard  Holt  Hutton.  With  Portrait.  Fifth 
Impression.     3  vols.,  crown  8vo,  3s.  6d.  each. 

ECONOMIC  STUDIES.  Edited  by  the  late  Richard  Holt 
Hutton.     Fourth  Impression.     Crown  8vo,  3s.  6d. 

THE  POSTULATES  OF  ENGLISH  POLITICAL  ECO- 
NOMY. (Extracted  from  Economic  Studies.)  With  Preface 
by  Alfred  Marshall,  Professor  of  Political  Economy,  Cam- 
bridge.    Crown  8vo,  2s.  6d. 

BIOGRAPHICAL  STUDIES.  Edited  by  the  late  Richard 
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A  PRACTICAL  PLAN  FOR  ASSIMILATING  THE 
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Crown  Svo,  2s.  6d. 

London,  New  York  and  Bombay : 
LONGMANS,     GREEN,    AND     CO. 


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sion, crown  Svo,  3s.  6d. 

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London  :  KEGAN  PAUL,  TRENCH,  TRUBNER  &  CO.,  Ltd. 


ECONOMIC  STUDIES 


BY    THE    LATE 


WALTER  BAGEHOT 

'1/ 

MA.  AND   FELLOW   OF   UNIVERSITY   COLLEGE,    LONDON 


EDITED    BY    THE    LATE 

RICHARD  HOLT  HUTTON 


FIFTH  IMPRESSION 


LONGMANS,    GREEN,    AND    CO. 

39  PATERNOSTER  ROW,  LONDON 

NEW  YORK  AND  BOMBAY 

1902 

All  riirhts  reserved 


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PREFATORY  NOTE  TO  SECOND  EDITION. 

Since  the  first  edition  of  this  book  was  pubh'shed, 
the  two  first  chapters,  which  alone  received  the 
author's  final  corrections,  have  been  published  sepa- 
rately as  a  "  Students'  Edition  "  for  Cambridge  under- 
graduates, with  an  interesting  preface  by  Professor 
Marshall.  There  is,  however,  so  much  even  in  the 
later  and  posthumous  part  of  the  book  which  is  of 
permanent  value,  that  a  second  edition  of  the  com- 
plete work  is  called  for,  and  is  now  given  to  the 
public. 

R.  H.  H. 
nth  September,   1888. 


PREFATORY  NOTE  TO  THE  FIRST 
EDITION. 

It  will  be  obvious  to  the  readers  of  this  book  that  a 
considerable  portion  of  it,  though  hardly  to  be  called 
fragmentary,  is  yet  not  at  all  as  complete  as  the 
author,  had  he  lived,  would  have  made  it;  and  that, 
in  the  last  two  essays  at  all  events,  there  are  con- 
siderable gaps  which  he  would  certainly  have  filled 
up.  Obviously,  too,  various  other  essays  would  have 
been  added — probably  two  or  three  between  those 
which  here  appear,  certainly  many  on  subjects  which 
would  naturally  have  followed  the  last  and  least  per- 
fect of  all  the  papers,  that  on  "  Cost  of  Production  ". 
Indeed  Mr.  Bagehot  is  known  to  have  stated  that  his 


VI  Prefatory  Note. 


economic  studies  would  have  worked  out  into  three 
distinct  volumes,  one  of  which  would  have  been  bio- 
graphical. Again,  no  careful  reader  can  fail  to  per- 
ceive that  there  is  a  certain  amount  of  redundancy  of 
statement  in  these  pages,  as  well  as  of  omission  ;  and 
this  was  inevitable,  for  in  preparing  his  finished 
writings  for  the  press,  the  author's  practice  was  to  cut 
away  as  well  as  to  add  much, — a  duty  which  I  was 
not  imprudent  enough  to  attempt  to  discharge  for  him. 
Therefore,  considering  that  only  the  first  two  essays 
had  been  published,  or  even  printed,  in  the  life-time 
of  the  author,  and  that,  even  with  the  most  valuable 
help  of  Mr.  Robert  Giffen,  the  head  of  the  Statistical 
Department  of  the  Board  of  Trade  (who,  during  the 
last  years  of  Mr.  Bagehot's  life,  had  a  better  know- 
ledge of  his  economic  mind  than  any  other  person),  I 
have  had  great  difficulty  in  determining  the  precise 
arrangement  of  some  parts  of  the  MS.,  the  folios  of 
which  were  often  inaccurately  numbered,  I  hope  that 
the  reader  may  wonder  less  that  much  is  incomplete, 
than  that  so  much  that  is  complete  and  valuable,  as 
well  as  original,  remains.  No  thoughtful  economist,  I 
am  sure,  who  reads  this  book,  will  fail  to  recognise  the 
value  of  a  great  portion  of  even  the  least  perfect  of 
these  essays. 

It  only  remains  for  me  to  express  my  hearty 
gratitude  to  Mr.  Giffen  for  his  willing  and  most 
important  help,  without  which  I  should  have  felt  no 
little  hesitation  in  deciding  on  the  true  sequence  of 
some  passages  in  this  volume. 

R.  H.  II. 

30/A  August,  1879. 


CONTENTS. 


I.  The    Postulates    of    English     Political 

Economy  -------  i 

1.  The  Transferability  of  Labour     -         -  28 

2.  The  Transferability  of  Capital     -         -  54 
II.  The  Preliminaries  of  Political  Economy  95 

III.  Adam  Smith  and  Our  Modern  Economy-  125 

IV.  Malthus                -         -         -         -         -         -  176 

V.  Ricardo         ■■         -         -         -         -         -         -  197 

\T.  The  Growth  of  Capital    -        -         .        -  209 

VH.  Cost  of  Production 238 

Appendix       ..-.---.  273 


THE  POSTULATES 


ENGLISH  POLITICAL  ECONOMY. 

Adam  Smith  completed  the  Wealth  of  Nations  in 
1776,  and  our  English  Political  Economy  is  there- 
fore just  a  hundred  years  old.  In  that  time  it  has 
had  a  wonderful  effect.  The  life  of  almost  every 
one  in  England — perhaps  of  every  one — is  different 
and  better  in  consequence  of  it.  The  whole  com- 
mercial policy  of  the  country  is  not  so  much  founded 
on  it  as  instinct  with  it.  Ideas  which  are  paradoxes 
everywhere  else  in  the  world  are  accepted  axioms 
here  as  results  of  it.  No  other  form  of  political 
philosophy  has  ever  had  one  thousandth  part  of 
the  influence  on  us ;  its  teachings  have  settled  down 
into  the  common  sense  of  the  nation,  and  have 
become  irreversible. 

We  are  too  familiar  with  the  good  we  have  thus 
acquired  to  appreciate  it  properly.  To  do  so  we 
should  see  what  our  ancestors  were  taught.  The  best 
book  on  Political  Economy  published  in  England 
before  that  of  Adam  Smith  is  Sir  James  Steuart's 
Inquiry,  a  book  full  of  acuteness,  and  written  by  a 
man  of  travel  and  cultivation.  And  its  teaching  is 
of  this  sort ;    "  In  all  trade  two  things  are  to  be 

I 


Economic  Studies. 


considered  in  the  commodity  sold.  The  first  is  the 
matter ;  the  seco-nd  is  the  labour  employed  to  render 
this  matter  useful.  The  matter  exported  from  a 
country  is  what  the  country  loses ;  the  price  of  the 
labour  exported  is  what  it  gains.  If  the  value  of 
the  matter  imported  be  greater  than  the  value  of 
what  is  exported  the  country  gains.  If  a  greater 
value  of  labour  be  imported  than  exported  the 
country  loses.  Why  ?  Because  in  the  first  case 
strangers  must  have  paid  in  matter  the  surplus  of 
labour  exported ;  and  in  the  second  place  because 
the  strangers  must  have  paid  to  strangers  in  matter 
the  surplus  of  labour  imported.  It  is,  therefore,  a 
general  maxim  to  discourage  the  importation  of 
work,  and  to  encourage  the  exportation  of  it."  ^ 

It  was  in  a  world  where  this  was  believed  that  our 
present  Political  Economy  began. 

Abroad  the  influence  of  our  English  system  has 
of  course  not  been  nearly  so  great  as  in  England 
itself.  But  even  there  it  has  had  an  enormous 
effect.  All  the  highest  financial  and  commercial 
legislation  of  the  continent  has  been  founded  upon 
it.  As  curious  a  testimony  perhaps  as  any  to  its 
power  is  to  be  found  in  the  memoir  of  Mollien — the 
financial  adviser  of  the  first  Napoleon,  le  ban  Mollien, 
whom  nothing  would  induce  him  to  discard  because 
his  administration  brought  francs,  whereas  that  of 
his  more  showy  competitors  might  after  all  end  in 
ideas.  "  It  was  then,"  says  Mollien,  in  giving  an 
account  of  his  youth,  "that  I  read  an  English  book 


*  Book  ii.,  chap.  xxiv. 


The  Postulates  of  Political  Economy.  3 

of  which  the  disciples  whom  M.  Turgot  had  left 
spake  with  the  greatest  praise — the  work  of  Adam 
Smith.  I  had  especially  remarked  how  warmly  the 
venerable  and  judicious  Malesherbes  used  to  speak 
of  it — this  book  so  deprecated  by  all  the  men  of 
the  old  routine  who  spoke  of  themselves  so  im- 
properly as  of  the  school  of  Colbert.  They  seemed 
to  have  persuaded  themselves  that  the  most  import- 
ant thing  for  our  nation  was  that  not  one  sou  should 
ever  leave  France ;  that  so  long  as  this  was  so,  the 
kind  and  the  amount  of  taxation,  the  rate  of  wages, 
the  greater  or  less  perfection  of  industrial  arts,  were 
things  of  complete  indifference,  provided  always  that 
one  Frenchman  gained  what  another  Frenchman 
lost." 

And  he  describes  how  the  Wealth  of  Nations  led 
him  to  abandon  those  absurdities  and  to  substitute 
the  views  with  which  we  are  now  so  familiar,  but 
on  which  the  "  good  Mollien "  dwells  as  on  new 
paradoxes.  In  cases  like  this,  one  instance  is  worth 
a  hundred  arguments.  We  see  in  a  moment  the 
sort  of  effect  that  our  English  Political  Economy 
has  had  when  we  find  it  guiding  the  finance  of 
Napoleon,  who  hated  ideologues,  and  who  did  not 
love  the  English. 

But  notwithstanding  these  triumphs,  the  position 
of  our  Political  Economy  is  not  altogether  satis- 
factory. It  lies  rather  dead  in  the  public  mind. 
Not  only  does  it  not  excite  the  same  interest  as 
formerly,  but  there  is  not  exactly  the  same  con- 
fidence in  it.  Younger  men  either  do  not  study  it, 
pr  do  not  fee}  that  it  comes  home  to  them,  and  that 


Economic  Studies. 


it  matches  with  their  most  Hving  ideas.  New 
sciences  have  come  up  in  the  last  few  years  with 
new  modes  of  investigation,  and  they  want  to  know 
what  is  the  relation  of  economic  science,  as  their 
fathers  held  it,  to  these  new  thoughts  and  these  new 
instruments.  They  ask,  often  hardly  knowing  it,  will 
this  "  science,"  as  it  claims  to  be,  harmonise  with 
what  we  now  know  to  be  sciences,  or  bear  to  be  tried 
as  we  now  try  sciences  ?  And  they  are  not  sure  of 
the  answer. 

Abroad,  as  is  natural,  th*;  revolt  is  more  avowed. 
Indeed,  though  the  Political  Economy  of  Adam 
Smith  penetrated  deep  into  the  continent,  what  has 
been  added  in  England  since  has  never  penetrated 
equally;  though  if  our  "science"  is  true,  the  newer 
work  required  a  greater  intellectual  effort,  and  is 
far  more  complete  as  a  scientific  achievement  than 
anything  which  Adam  Smith  did  himself.  Political 
Economy,  as  it  was  taught  by  Ricardo,  has  had  in 
this  respect  much  the  same  fate  as  another  branch 
of  English  thought  of  the  same  age,  with  which  it 
has  many  analogies — ^jurisprudence  as  it  was  taught 
by  Austin  and  Bentham  ;  it  has  remained  insular. 
I  do  not  m.ean  that  it  was  not  often  read  and  under- 
stood ;  of  course  it  was  so,  though  it  was  often 
misread  and  misunderstood.  But  it  never  at  all 
reigned  abroad  as  it  reigns  here  ;  never  was  really 
fully  accepted  in  other  countries  as  it  was  here  where 
it  arose.  And  no  theory,  economic  or  political,  can 
now  be  both  insular  and  secure ;  foreign  thoughts 
come  soon  and  trouble  us ;  there  will  always  be 
doubt  here  as  to  what  is  only  believed  here. 


The  Postulates  of  Political  Economy. 


There  are,  no  doubt,  obvious  reasons  why  English 
PoHtical  Economy  should  be  thus  unpopular  out  of 
England.  It  is  known  everywhere  as  the  theory 
"of  Free-trade,"  and  out  of  England  Free-trade  is 
almost  everywhere  unpopular.  Experience  shows 
that  no  belief  is  so  difficult  to  create,  and  no  one  so 
easy  to  disturb.  The  Protectionist  creed  rises  like  a 
weed  in  every  soil.  "  Why,"  M.  Thiers  was  asked, 
"  do  you  give  these  bounties  to  the  French  sugar 
refiners?"  "I  wish,"  replied  he,  "the  tall  chim- 
neys to  smoke."  Every  nation  wishes  prosperity  for 
some  conspicuous  industry.  At  what  cost  to  the 
consumer,  by  what  hardship  to  less  conspicuous 
industries,  that  prosperity  is  obtained,  it  does  not 
care.  Indeed,  it  hardly  knows,  it  will  never  read, 
it  will  never  apprehend  the  refined  reasons  which 
prove  those  evils  and  show  how  great  they  are  ;  the 
visible  picture  of  the  smoking  chimneys  absorbs  the 
whole  mind.  And,  in  many  cases,  the  eagerness  of 
England  in  the  Free-trade  cause  only  does  that  cause 
harm.  Foreigners  say  :  "  Your  English  traders  are 
strong  and  rich  ;  of  course  you  wish  to  under-sell 
our  traders,  who  are  weak  and  poor.  You  have  in- 
vented this  Political  Economy  to  enrich  yourselves 
and  ruin  us ;  we  will  see  that  you  shall  not  do  so." 

And  that  English  Political  Economy  is  more 
opposed  to  the  action  of  Government  in  all  ways 
than  most  such  theories,  brings  it  no  accession  of 
popularity.  All  Governments  like  to  interfere ;  it 
elevates  their  position  to  make  out  that  they  can 
cure  the  evils  of  mankind.  And  all  zealots  wish 
they  should  interfere,  for  such  zealots  think  they  can 


Economic  Studies. 


and  may  convert  the  rulers  and  manipulate  the 
State  control :  it  is  a  distinct  object  to  convert  a 
definite  man,  and  if  he  will  not  be  convinced  there  is 
always  a  hope  of  his  successor.  But  most  zealots 
dislike  to  appeal  to  the  mass  of  mankind ;  they  know 
instinctively  that  it  will  be  too  opaque  and  impene- 
trable for  them. 

Still  I  do  not  believe  that  these  are  the  only 
reasons  why  our  English  Political  Economy  is  not 
estimated  at  its  value  abroad.  I  believe  that  this 
arises  from  its  special  characteristic,  from  that  which 
constitutes  its  peculiar  value,  and,  paradoxical  as  it 
may  seem,  I  also  believe  that  this  same  character- 
istic is  likewise  the  reason  why  it  is  often  not 
thoroughly  understood  in  England  itself.  The 
science  of  Political  Economy  as  we  have  it  in  Eng- 
land may  be  defined  as  the  science  of  business,  such 
as  business  is  in  large  productive  and  trading  com- 
munities. It  is  an  analysis  of  that  world  so  familiar 
to  many  Englishmen — the  "great  commerce"  by 
which  England  has  become  rich.  It  assumes  the 
principal  facts  which  make  that  commerce  possible, 
and  as  is  the  way  of  an  abstract  science  it  isolates 
and  simplifies  them ;  it  detaches  them  from  the  con- 
fusion with  which  they  are  mixed  in  fact.  And  it 
deals  too  with  the  men  who  carry  on  that  commerce, 
and  who  make  it  possible.  It  assumes  a  sort  of 
human  nature  such  as  we  see  everywhere  around  us, 
and  again  it  simplifies  that  human  nature  ;  it  looks 
at  one  part  of  it  only.  Dealing  with  matters  of 
"business,"  it  assumes  that  man  is  actuated  only 
by  motives  of  business.     It  assumes  that  every  man 


The  Postulates  of  Political  Economy.  7 

who  makes  anything,  makes  it  for  money,  that  he 
always  makes  that  which  brings  him  in  most  at 
least  cost,  and  that  he  will  make  it  in  the  way  that 
will  produce  most  and  spend  least ;  it  assumes  that 
every  man  who  buys,  buy:,  with  his  whole  heart, 
and  that  he  who  sells,  sells  with  his  whole  heart, 
each  wanting  to  gain  all  possible  advantage.  Of 
course  we  know  that  this  is  not  so,  that  men  are  not 
like  this ;  but  we  assume  it  for  simplicity's  sake,  as 
an  hypothesis.  And  this  deceives  many  excellent 
people,  for  from  deficient  education  they  have  very 
indistinct  ideas  what  an  abstract  science  is. 

More  competent  persons,  indeed,  have  understood 
that  English  Political  Economists  are  not  speaking 
of  real  men,  but  of  imaginary  ones ;  not  of  men  as 
we  see  them,  but  of  men  as  it  is  convenient  to  us  to 
suppose  they  are.  But  even  they  often  do  not 
understand  that  the  world  which  our  Political 
Economists  treat  of,  is  a  very  limited  and  peculiar 
world  also.  They  often  imagine  that  what  they 
read  is  applicable  to  all  states  of  society,  and  to  all 
equally,  whereas  it  is  only  true  of — and  only  proved 
as  to — states  of  society  in  which  commerce  has 
largely  developed,  and  where  it  has  taken  the  form 
of  development,  or  something  near  the  form,  which 
it  has  taken  in  England. 

This  explains  why  abroad  the  science  has  not 
been  well  understood.  Commerce,  as  we  have  it  in 
England,  is  not  so  full-grown  anywhere  else  as  it  is 
here — at  any  rate,  is  not  so  outside  the  lands  popu- 
lated by  the  Anglo-Saxon  race.  Here  it  is  not  only 
a  thing  definite  and  observable,  but  about  the  most 


8  Rconomic  Studies. 


definite  thing  we  have,  the  thing  which  it  is  most 
difficult  to  help  seeing.  But  on  the  continent, 
though  there  is  much  that  is  like  it,  and  though  that 
much  is  daily  growing  more,  there  is  nowhere  the 
same  pervading  entity — the  same  patent,  pressing, 
and  unmistakable  object. 

And  this  brings  out  too  the  inherent  difficulty  of 
the  subject — a  difficulty  which  no  other  science,  I 
think,  presents  in  equal  magnitude.  Years  ago  I 
heard  Mr.  Cobden  say  at  a  league  meeting  that 
"  Political  Economy  was  the  highest  study  of  the 
human  mind,  for  that  the  physical  sciences  required 
by  no  means  so  hard  an  effort ".  An  orator  cannot 
be  expected  to  be  exactly  precise,  and  of  course 
Political  Economy  is  in  no  sense  the  highest  study 
of  the  mind — there  are  others  which  are  much 
higher,  for  they  are  concerned  with  things  much 
nobler  than  wealth  or  money ;  nor  is  it  true  that  the 
effort  of  mind  which  Political  Economy  requires  is 
nearly  as  great  as  that  required  for  the  abstruser 
theories  of  physical  science,  for  the  theory  of  gravita- 
tion, or  the  theory  of  natural  selection ;  but,  never- 
theless, what  Mr.  Cobden  meant  had — as  was  usual 
with  his  first-hand  mind — a  great  fund  of  truth.  He 
meant  that  Political  Economy — effectual  Political 
Economy,  Political  Economy  which  in  complex  pro- 
blems succeeds — is  a  very  difficult  thing  ;  something 
altogether  more  abstruse  and  difficult,  as  well  as  more 
conclusive,  than  that  which  many  of  those  who 
rush  in  upon  it  have  a  notion  of  It  is  an  abstract 
science  which  labours  under  a  special  hardship. 
Those  who  are  conversant  with  its  abstractions  are 


The  Postulates  of  Political  Economy. 


usually  without  a  true  contact  with  its  facts ;  those 
who  are  in  contact  with  its  facts  have  usually  little 
sympathy  with  and  little  cognisance  of  its  abstractions. 
Literary  men  who  write  about  it  are  constantly  using 
what  a  great  teacher  calls  "  unreal  words  " — that  is, 
they  are  using  expressions  with  which  they  have 
no  complete  vivid  picture  to  correspond.  They  are 
like  physiologists  who  have  never  dissected ;  like 
astronomers  who  have  never  seen  the  stars ;  and,  in 
consequence,  just  when  they  seem  to  be  reasoning  at 
their  best,  their  knowledge  of  the  facts  falls  short. 
Their  primitive  picture  fails  them,  and  their  deduction 
altogether  misses  the  mark — sometimes,  indeed,  goes 
astray  so  far  that  those  who  live  and  move  among 
the  facts  boldly  say  that  they  cannot  comprehend 
"how  any  one  can  talk  such  nonsense".  Yet,  on 
the  other  hand,  these  people  who  live  and  move 
among  the  facts  often,  or  mostly,  cannot  of  themselves 
put  together  any  precise  reasonings  about  them. 
Men  of  business  have  a  solid  judgment — a  wonderful 
guessing  power  of  what  is  going  to  happen — each  in 
his  own  trade ;  but  they  have  never  practised  them- 
selves in  reasoning  out  their  judgments  and  in 
supporting  their  guesses  by  argument  :  probably  if 
they  did  so  some  of  the  finer  and  correcter  parts  of 
their  anticipations  would  vanish.  They  are  like  the 
sensible  lady  to  whom  Coleridge  said :  "  Madam,  I 
accept  your  conclusion,  but  you  must  let  me  find  the 
logic  for  it".  Men  of  business  can  no  more  put  into 
words  much  of  what  guides  their  life  than  they  could 
tell  another  person  how  to  speak  their  language. 
And   so  the   "  theory  of  business "   leads  a   life  of 


10  Economic  Studies. 


obstruction,  because  theorists  do  not  see  the  business 
and  the  men  of  business  will  not  reason  out  the 
theories.  Far  from  wondering  that  such  a  science 
is  not  completely  perfect,  we  should  rather  wonder 
that  it  exists  at  all. 

Something  has  been  done  to  lessen  the  difficulty  by 
statistics.  These  give  tables  of  facts  which  help 
theoretical  writers  and  keep  them  straight,  but  the 
cure  is  not  complete.  Writers  without  experience  of 
trade  are  always  fancying  that  these  tables  mean 
something  more  than,  or  something  different  from, 
that  which  they  really  mean.  A  table  of  prices,  for 
example,  seems  an  easy  and  simple  thing  to  under- 
stand, and  a  whole  literature  of  statistics  assumes 
that  simplicity ;  but  in  fact  there  are  many  difficulties. 
At  the  outset  there  is  a  difference  between  the  men 
of  theory  and  the  men  of  practice.  Theorists  take 
a  table  of  prices  as  facts  settled  by  unalterable  laws ; 
a  stockbroker  will  tell  you  such  prices  can  be 
"made".  In  actual  business  such  is  his  constant 
expression.  If  you  ask  him  what  is  the  price  of  such 
a  stock,  he  will  say,  if  it  be  a  stock  at  all  out  of  the 
common  :  **  I  do  not  know,  sir  :  I  will  go  on  to  the 
market  and  get  them  to  make  me  a  price  ".  And  the 
following  passage  from  the  Report  of  the  late  Foreign 
Loans  Committee  shows  what  sort  of  process 
"  making "  a  price  sometimes  is:  "Immediately," 
they  say,  "  after  the  publication  of  the  prospectus  " 
— the  case  is  that  of  the  Honduras  Loan — "and 
before  any  allotment  was  made,  M.  Lefevre  authorised 
extensive  purchases  and  sales  of  loans  on  his  behalf; 
brokers  were  employed  by  him  to  deal  in  the  manner 


The  Postulates  of  Political  Economy.  ii 

best  calculated  to  maintain  the  price  of  the  stock  ; 
the  brokers  so  employed  instructed  jobbers  to 
purchase  the  stock  when  the  market  required  to  be 
strengthened,  and  to  sell  it  if  the  market  was  suf- 
ficiently firm.  In  consequence  of  the  market  thus 
created  dealings  were  carried  on  to  a  very  large 
amount.  Fifty  or  a  hundred  men  were  in  the  market 
dealing  with  each  other  and  the  brokers  all  round. 
One  jobber  had  sold  the  loan  (£2,500,000)  once  over." 
Much  money  was  thus  abstracted  from  credulous 
rural  investors  ;  and  I  regret  to  say  that  book  statists 
are  often  equally,  though  less  hurtfully,  deceived. 
They  make  tables  in  which  artificial  prices  run  side 
by  side  with  natural  ones ;  in  which  the  price  of  an 
article  like  Honduras  scrip,  which  can  be  indefinitely 
manipulated,  is  treated  just  like  the  price  of  consols, 
vvhich  can  scarcely  be  manipulated  at  all.  In  most 
cases  it  never  occurs  to  the  maker  of  the  table  that 
there  could  be  such  a  thing  as  an  artificial — a  mala 
fide — price  at  all.  He  imagines  all  prices  to  be 
equally  straightforward.  Perhaps,  however,  this  may 
be  said  to  be  an  unfair  sample  of  price  difficulties, 
because  it  is  drawn  from  the  Stock  Exchange,  the 
most  complex  market  for  prices  ;  and  no  doubt  the 
Stock  Exchange  has  its  peculiar  difficulties,  of 
which  I  certainly  shall  not  speak  lightly ;  but  on 
the  other  hand,  in  one  cardinal  respect,  it  is  the 
simplest  of  markets.  There  is  no  question  in  it  of 
the  physical  quality  of  commodities  :  one  Turkish 
bond  of  1858  is  as  good  or  bad  as  another;  one 
ordinary  share  in  a  railway  exactly  the  same  as  any 
other   ordinary    share  ;    but   in   other  markets  each 


12  Economic  Studies. 


sample  differs  in  quality,  and  it  is  a  learning  in  each 
market  to  judge  of  qualities,  so  many  are  they,  and 
so  fine  their  gradations.  Yet  mere  tables  do  not  tell 
this,  and  cannot  tell  it.  Accordingly  in  a  hundred 
cases  you  may  see  "prices"  compared  as  if  they 
were  prices  of  the  same  thing,  when,  in  fact,  they 
are  prices  of  different  things.  The  Gazette  average 
of  corn  is  thus  compared  incessantly,  yet  it  is  hardly 
the  price  of  the  same  exact  quality  of  corn  in  any 
two  years.  It  is  an  average  of  all  the  prices  in  all 
the  sales  in  all  the  markets.  But  this  year  the  kind 
of  corn  mostly  sold  may  be  very  superior,  and  last 
year  very  inferior — yet  the  tables  compare  the  two 
without  noticing  the  difficulty.  And  when  the  range 
of  prices  runs  over  many  years,  the  figures  are  even 
more  treacherous,  for  the  names  remain,  while  the 
quality,  the  thing  signified,  is  changed.  And  of  this 
persons  not  engaged  in  business  have  no  warning. 
Statistical  tables,  even  those  which  are  most  elaborate 
and  careful,  are  not  substitutes  for  an  actual  cog- 
nisance of  the  facts :  they  do  not,  as  a  rule,  convey 
a  just  idea  of  the  movements  of  a  trade  to  persons 
not  in  the  trade. 

It  will  be  asked,  why  do  you  frame  such  a  science 
if  from  its  nature  it  is  so  difficult  to  frame  it  ?  The 
answer  is  that  it  is  necessary  to  frame  it,  or  we  must 
go  without  important  knowledge.  The  facts  of 
commerce,  especially  of  the  great  commerce,  are  ver}- 
complex.  Some  of  the  most  important  are  not  on 
the  surface ;  some  of  those  most  likely  to  confuse  are 
on  the  surface.  If  you  attempt  to  solve  such  problems 
without  some  apparatus  of  method,  you  are  as  sure 


The  Postulates  of  Political  Economy.  13 

to  fail  as  if  you  try  to  take  a  modern  military  fortress 
— a  Met2  or  a  Belfort — by  common  assault  ;  you 
must  have  guns  to  attack  the  one,  and  method  to 
attack  the  other. 

The  way  to  be  sure  of  this  is  to  take  a  few  new 
problems,  such  as  are  for  ever  presented  by  investiga- 
tion and  life,  and  to  see  what  by  mere  common  sense 
we  can  make  of  them.  For  example,  it  is  said  that 
the  general  productiveness  of  the  earth  is  less  or 
more  in  certain  regular  cycles,  corresponding  with 
perceived  changes  in  the  state  of  the  sun, — what 
would  be  the  effect  of  this  cyclical  variation  in  the 
efficiency  of  industry  upon  commerce  ?  Some  hold, 
and  as  I  think  hold  justly,  that,  extraordinary  as  it 
may  seem,  these  regular  changes  in  the  sun  have 
much  to  do  with  the  regular  recurrence  of  difficult 
times  in  the  money  market.  What  common  sense 
would  be  able  to  answer  these  questions  ?  Yet  we 
may  be  sure  that  if  there  be  a  periodical  series  of 
changes  in  the  yielding  power  of  this  planet,  that 
series  will  have  many  consequences  on  the  industry 
of  men,  whether  those  which  have  been  suggested  or 
others. 

Or  to  take  an  easier  case,  who  can  tell  without 
instruction  what  is  likely  to  be  the  effect  of  the  new 
loans  of  England  to  foreign  nations  ?  We  press 
upon  half-finished  and  half-civilised  communities  in- 
calculable sums ;  we  are  to  them  what  the  London 
money-dealers  are  to  students  at  Oxford  and  Cam- 
bridge. We  enable  these  communities  to  read  in 
every  newspaper  that  they  can  have  ready  money, 
almost  of  any  amount,  on  "  personal  security  ".     No 


14  Economic  Studies. 


incipient  and  no  arrested  civilisations  ever  had  this 
facility  before.  What  will  be  the  effect  on  such 
civilisations  now,  no  untutored  mind  can  say. 

Or  again  :  since  the  Franco-German  War  an  im- 
mense sum  of  new  money  has  come  to  England ; 
England  has  become  the  settling-place  of  interna- 
tional bargains  much  more  than  it  was  before ;  but 
whose  mind  could  divine  the  effect  of  such  a  change 
as  this,  except  it  had  a  professed  science  to  help  it  ? 

There  are  indeed  two  suggested  modes  of  investiga- 
tion, besides  our  English  Political  Economy,  and 
competing  with  it.  One  is  the  Enumerative,  or  if  I 
may  coin  such  a  word,  the  "  all-case  method  ".  One 
school  of  theorists  say,  or  assume  oftener  than  they 
say,  that  you  should  have  a  "  complete  experience  "  ; 
that  you  should  accumulate  all  the  facts  of  these 
subjects  before  you  begin  to  reason.  A  very  able 
German  writer  has  said,  in  the  Fortnightly  Re- 
view, ^  of  a  great  economic  topic,  banking :  "I 
venture  to  suggest  that  there  is  but  one  way  of 
arriving  at  such  knowledge  and  truth  " — that  is, 
absolute  truth  and  full  knowledge — "  namely,  a 
thorough  investigation  of  the  facts  of  the  case.  By 
the  facts,  I  mean  not  merely  such  facts  as  present 
themselves  to  so-called  practical  men  in  the  common 
routine  of  business,  but  the  facts  which  a  complete 
historical  and  statistical  inquiry  would  develop. 
When  such  a  work  shall  have  been  accomplished, 
German   economists  may  boast  of  having  restored 

'  (iustav  Cohn,  in  the  Fortnightly  Review  for  September, 
1873- 


Tlve  Postulates  of  Political  Economy.  15 

the  principles  of  banking,  that  is  to  say,  of  German 
banking,  but  not  even  then  of  banking  in  general. 
To  set  forth  principles  of  banking  in  general,  it  will 
be  necessary  to  master  in  the  same  way  the  facts  ol 
English,  Scotch,  French,  and  American  banking — in 
short,  of  every  country  where  banking  exists."  "  The 
only,"  he  afterwards  continues,  "  but  let  us  add  also, 
the  safe  ground  of  hope  for  Political  Economy  is, 
following  Bacon's  exhortation  to  recommence  afresh 
the  whole  work  of  economic  inquiry.  In  what  con- 
dition would  chemistry,  physics,  geology,  zoology, 
be,  and  the  other  branches  of  natural  science  which 
have  yielded  such  prodigious  results,  if  their  students 
had  been  linked  to  their  chains  of  deduction  from  the 
assumptions  and  speculations  of  the  last  century  ?  " 
But  the  reply  is  that  the  method  which  Mr.  Cohn 
suggests  was  tried  in  physical  science  and  failed. 
And  it  is  very  remarkable  that  he  should  not  have 
remembered  it  as  he  speaks  of  Lord  Bacon,  for  the 
method  which  he  suggests  is  exactly  that  which 
Lord  Bacon  himself  followed,  and  owing  to  the  mis- 
taken nature  of  which  he  discovered  nothing.  The 
investigation  into  the  nature  of  heat  in  the  Novum 
Organum  is  exactly  such  a  collection  of  facts  as  Mr. 
Cohn  suggests, — but  nothing  comes  of  it.  As  Mr. 
Jevons  well  says :  "  Lord  Bacon's  notion  of  scientific 
method  was  that  of  a  kind  of  scientific  book-keeping. 
Facts  were  to  be  indiscriminately  gathered  from 
every  source,  and  posted  in  a  kind  of  ledger  from 
which  would  emerge  in  time  a  clear  balance  of  truth. 
It  is  difficult  to  imagine  a  less  likely  way  of  arriving 
3t  discoveries,"     And  yet  it  is  precisely  that  from 


1 6  Economic  Studies. 


which,  mentioning  Bacon's  name,  but  not  forewarned 
by  his  experience,  Mr.  Cohn  hopes  to  make  them. 

The  real  plan  that  has  answered  in  physical 
science  is  much  simpler.  The  discovery  of  a  law  of 
nature  is  very  like  the  discovery  of  a  murder.  In 
the  one  case  you  arrest  a  suspected  person,  and  in 
the  other  you  isolate  a  suspected  cause.  When 
Newton,  by  the  fall  of  the  apple,  or  something  else, 
was  led  to  think  that  the  attraction  of  gravitation 
would  account  for  the  planetary  motions,  he  took 
that  cause  by  itself,  traced  out  its  effects  by  abstract 
mathematics,  and,  so  to  say,  found  it  "guilty," — he 
discovered  that  it  would  produce  the  phenomenon 
under  investigation.  In  the  same  way  geology  has 
been  revolutionised  in  our  own  time  by  Sir  Charles 
Lyell.  He  for  the  first  time  considered  the  effects 
of  one  particular  set  of  causes  by  themselves.  He 
showed  how  large  a  body  of  facts  could  be  explained 
on  the  hypothesis  "that  the  forces  now  operating 
upon  and  beneath  the  earth's  surface  are  the  same 
both  in  kind  and  degree  as  those  which,  at  remote 
epochs,  have  worked  out  geological  changes  ".  He 
did  not  wait  to  begin  his  inquiry  till  his  data  about 
all  kinds  of  strata,  or  even  about  any  particular 
kind,  were  complete ;  he  took  palpable  causes  as  he 
knew  them,  and  showed  how  many  facts  they  would 
explain ;  he  spent  a  long  and  most  important  life  in 
fitting  new  facts  into  an  abstract  and  youthful  specu- 
lation. Just  so  in  an  instance  which  has  made  a 
literature  and  gone  the  round  of  the  world.  Mr.  Dar- 
win, who  is  a  disciple  of  Lyell,  has  shown  how  one  vera 
causa,   "natural    selection,"  would    account   for  an 


The  Postulates  of  Political  Economy.  17 

immense  number  of  the  facts  of  nature ;  for  how 
many,  no  doubt,  is  controverted,  but,  as  is  admitted, 
for  a  very  large  number.  And  this  he  showed  by 
very  difficult  pieces  of  reasoning  which  very  few 
persons  would  have  thought  of,  and  which  most 
people  found  at  first  not  at  all  easy  to  comprehend. 
The  process  by  which  physical  science  has  become 
what  it  is,  has  not  been  that  of  discarding  abstract 
speculations,  but  of  working  out  abstract  specula- 
tions. The  most  important  known  laws  of  nature 
— the  laws  of  motion — the  basis  of  the  figures  in 
the  Nautical  Almanack  by  which  every  ship  sails 
— are  difficult  and  abstract  enough,  as  most  of  us 
found  to  our  cost  in  our  youth. 

There  is  no  doubt  a  strong  tendency  to  revolt 
against  abstract  reasoning.  Human  nature  has  a 
strong  "  factish  "  element  in  it.  The  reasonings  of 
the  Principia  are  now  accepted.  But  in  the  be- 
ginning they  were  "mere  crotchets  of  Mr.  Newton's"; 
Flamstead,  the  greatest  astronomical  discoverer  of 
his  day — the  man  of  facts,  par  excellence — so  called 
them ;  they  have  irresistibly  conquered ;  but  at 
first  even  those  most  conversant  with  the  matter  did 
not  believe  ihem.  I  do  not  claim  for  the  conclusions 
of  English  Political  Economy  the  same  certainty 
as  for  the  "  laws  of  motion ".  But  I  say  that  the 
method  by  which  they  have  been  obtained  is  the 
same,  and  that  the  difference  in  the  success  of  the 
two  investigations  largely  comes  from  this — that  the 
laws  of  wealth  are  the  laws  of  a  most  complex 
phenomenon  which  you  can  but  passively  observe, 
and    on    which    you    cannot    try    experiments    for 

2 


l8  Economic  Studies. 


science'  sake,  and  that  the  laws  of  motion  relate  to 
a  matter  on  which  you  can  experiment,  and  which 
is  comparatively  simple  in  itself. 

And  to  carry  the  war  into  the  enemy's  eduntry,  I 
say  also  that  the  method  proposed  by  Mr.  Cohn,  the 
"all-case"  method,  is  impossible.  When  I  read  the 
words  "all  the  facts  of  English  banking,"  I  cannot 
but  askj  of  what  facts  is  Mr.  Cohn  thinking  ?  Bank- 
ing in  England  goes  on  growing,  multiplying,  and 
changing,  as  the  English  people  itself  goes  on  grow- 
ing, multiplying,  and  changing.  The  facts  of  it  are 
one  thing  to-day  and  another  to-morrow ;  nor  at  one 
moment  does  any  one  know  them  completely.  Those 
who  best  know  many  of  them  will  not  tell  them  or 
hint  at  them ;  gradually  and  in  the  course  of  years 
they  separately  come  to  light,  and  by  the  time  they 
do  so,  for  the  most  part,  another  crop  of  unknown 
ones  has  accumulated.  If  we  wait  to  reason  till  the 
"facts"  are  complete,  we  shall  wait  till  the  human 
race  has  expired.  I  consider  that  Mr.  Cohn,  and  those 
who  think  with  him,  are  too  "bookish"  in  this  matter. 
They  mean  by  having  all  the  "facts"  before  them, 
having  all  the  printed  facts,  all  the  statistical  tables. 
But  what  has  been  said  of  Nature  is  true  of  com- 
merce. "  Nature,"  says  Sir  Charles  Lyell,  "  has 
made  it  no  part  of  her  concern  to  provide  a  record 
of  her  operations  for  the  use  of  men;"  nor  does 
trade  either — only  the  smallest  of  fractions  of  actual 
transactions  is  set  down,  so  that  investigation  can 
use  it.  Literature  has  been  called  the  "fragment 
of  fragments,"  and  in  the  same  way  statistics  are 
the   "  scrap  of  scraps  ".      In  real  life  scarcely  any 


The  Postulates  of  Political  Economy.  19 

one  knows  more  than  a  small  part  of  what  his 
neighbour  is  doing,  and  he  scarcely  makes  public 
any  of  that  little,  or  of  what  he  does  himself.  A 
complete  record  of  commercial  facts,  or  even  of  one 
kind  of  such  facts,  is  the  completest  of  dreams. 
You  might  as  well  hope  for  an  entire  record  of 
human  conversation. 

There  is  also  a  second  antagonistic  method  to 
that  of  English  Political  Economy,  which,  by  con- 
trast, I  will  call  the  "single-case"  method.  It 
is  said  that  you  should  analyse  each  group  of 
facts  separately — that  you  should  take  the  panic 
of  1866  separately,  and  explain  it ;  or,  at  any  rate, 
the  whole  history  of  Lombard  Street  separately, 
and  explain  it.  And  this  is  very  good  and  very 
important ;  but  it  is  no  substitute  for  a  prelimin- 
ary theory.  You  might  as  well  try  to  substitute  a 
corollary  for  the  proposition  on  which  it  depends. 
The  history  of  a  panic  is  the  history  cf  a  confused 
conflict  of  many  causes ;  and  unless  you  know  what 
sort  of  effect  each  cause  is  likely  to  produce,  you 
cannot  explain  any  part  of  what  happens.  It  is 
trying  to  explain  the  bursting  of  a  boiler  without 
knowing  the  theory  of  steam.  Any  history  of  similar 
phenomena  like  those  of  Lombard  Street  could  not 
be  usefully  told,  unless  there  was  a  considerable 
accumulation  of  applicable  doctrine  before  existing 
You  might  as  well  try  to  write  the  "life"  of  a  ship, 
making  as  you  went  along  the  theory  of  naval  con- 
struction. Clumsy  dissertations  would  run  all  over 
the  narrative  ;  and  the  result  would  be  a  perfect 
puzzle. 


20  Economic  Studies. 


I  have  been  careful  not  to  use  in  this  discussion 
of  methods  the  phrase  which  is  oftenest  used,  viz., 
the  Historical  method,  because  there  is  an  excessive 
ambiguity  in  it.  Sometimes  it  seems  what  I  have 
called  the  Enumerative,  or  "  all-case "  method ; 
sometimes  the  "  single-case  "  method  ;  a  most  con- 
fusing double  meaning,  for  by  the  mixture  of  the 
two,  the  mind  is  prevented  from  seeing  the  defects 
of  either.  And  sometimes  it  has  other  meanings, 
with  which,  as  I  shall  show,  I  have  no  quarrel, 
but  rather  much  sympathy.  Rightly  conceived  the 
historical  method  is  no  rival  to  the  abstract  method 
rightly  conceived.  But  I  shall  be  able  to  explain 
this  better  and  less  tediously  at  the  end  of  these 
papers  than  I  can  at  the  beginning. 

This  conclusion  is  confirmed  by  a  curious  circum- 
stance. At  the  very  moment  that  our  Political 
Economy  is  objected  to  in  some  quarters  as  too 
abstract,  in  others  an  attempt  is  made  to  substitute 
for  it  one  which  is  more  abstract  still.  Mr.  Stanley 
Jevons,  and  M.  Walras,  of  Lausanne,  without  com- 
munication and  almost  simultaneously,  have  worked 
out  a  ' '  mathematical "  theory  of  Political  Economy  ; — 
and  any  one  who  thinks  what  is  ordinarily  taught  in 
England  objectionable,  because  it  is  too  little  con- 
crete in  its  method,  and  looks  too  unlike  life  and 
business,  had  better  try  the  new  doctrine,  which  he 
will  find  to  be  much  worse  on  these  points  than  the 
old. 

But  I  shall  be  asked,  Do  you  then  say  that  English 
Political  Economy  is  perfect  ? — surely  it  is  contrary 
to  reason  that  so  much  difficulty  should  be  felt  in 


The  Postulates  of  Political  Economy.  21 

accepting  a  real  science  properly  treated  ?  At  the 
first  beginning  no  doubt  there  are  difficulties  in 
gaining  a  hearing  for  all  sciences,  but  English 
Political  Economy  has  long  passed  out  of  its  first 
beginning  ?  Surely,  if  there  were  not  some  intrinsic 
defect,  it  would  have  been  firm.ly  and  coherently 
established,  just  as  others  are  ? 

In  this  reasoning  there  is  evident  plausibility,  and 
I  answer  that,  in  my  judgment,  there  are  three  defects 
in  the  mode  in  which  Political  Economy  has  been 
treated  in  England,  which  have  prevented  people 
from  seeing  what  it  really  is,  and  from  prizing  it  at 
its  proper  value. 

First, — It  has  often  been  put  forward,  not  as  a 
theory  of  the  principal  causes  affecting  wealth  in 
certain  societies,  but  as  a  theory  of  the  principal, 
sometimes  even  of  all,  the  causes  affecting  wealth  in 
every  society.  And  this  has  occasioned  many  and 
strong  doubts  about  it.  Travellers  fresh  from  the 
sight,  and  historians  fresh  from  the  study,  of  peculiar 
and  various  states  of  society,  look  with  dislike  and 
disbelief  on  a  single  set  of  abstract  propositions 
which  claim,  as  they  think,  to  be  applicable  to  all 
such  societies,  and  to  explain  a  most  important  part 
of  most  of  them.  I  cannot  here  pause  to  say  how 
far  particular  English  Economists  have  justified  this 
accusation ;  I  only  say  that,  taking  the  whole  body 
of  them,  there  is  much  ground  for  it,  and  that  in 
almost  every  one  of  them  there  is  some  ground.  No 
doubt  almost  every  one — every  one  of  importance — 
has  admitted  that  there  is  a  "friction"  in  society 
svhich  counteracts  the  effect  of  the  causes  treated  of. 


22  Economic  Studies. 


But  in  general  they  leave  their  readers  with  the  idea 
that,  after  all,  this  friction  is  but  subordinate ;  that 
probably  in  the  course  of  years  it  may  be  neglected ; 
and,  at  any  rate,  that  the  causes  assigned  in  the 
science  of  Political  Economy,  as  they  treat  it,  are  the 
main  and  principal  ones.  Now  I  hold  that  these 
causes  are  only  the  main  ones  in  a  single  kind  of 
society — a  society  of  grown-up  competitive  commerce, 
such  as  we  have  in  England  ;  that  it  is  only  in  such 
societies  that  the  other  and  counteracting  forces  can 
be  set  together  under  the  minor  head  of  "  friction  "  ; 
but  that  in  other  societies  these  other  causes — in 
some  cases  one,  and  in  some  another — are  the  most 
effective  ones,  and  that  the  greatest  confusion  arises 
if  you  try  to  fit  on  M«-economic  societies  the  theories 
only  true  of,  and  only  proved  as  to,  economic  ones. 
In  my  judgment,  we  need — not  that  the  authority 
of  our  Political  Economy  should  be  impugned,  but 
that  it  should  be  minimised ;  that  we  should  realise 
distinctly  where  it  is  established,  and  where  not ; 
that  its  sovereignty  should  be  upheld,  but  its  frontiers 
marked.  And  until  this  is  done,  I  am  sure  that  there 
will  remain  the  same  doubt  and  hesitation  in  many 
minds  about  the  science  that  there  is  now. 

Secondly, — I  think  in  consequence  of  this  defect 
of  conception  Economists  have  been  far  more  ab- 
stract, and  in  consequence  much  more  dry,  than 
they  need  have  been.  If  they  had  distinctly  set 
before  themselves  that  they  were  dealing  only  with 
the  causes  of  wealth  in  a  single  set  of  societies,  they 
might  have  effectively  pointed  their  doctrines  with 
facts   from   those    societies.     But,   so   long  as   the 


The  Postulates  of  Political  Economy.  23 

vision  of  universal  theory  vaguely  floated  before 
them,  they  shrank  from  particular  illustrations. 
Real  societies  are  plainly  so  many  and  so  unlike, 
that  an  instance  from  one  kind  does  not  show  that 
the  same  thing  exists  in  other  societies ; — it  rather 
raises  in  the  mind  a  presumption  that  it  does  not 
exist  there ;  and  therefore  speculators  aiming  at  an 
all-embracing  doctrine  refrain  from  telling  cases,  be- 
cause those  cases  are  apt  to  work  in  unexpected  ways, 
and  to  raise  up  the  image  not  only  of  the  societies  in 
which  the  tenet  illustrated  is  true,  but  also  of  the 
opposite  group  in  which  it  is  false. 

Thirdly, — It  is  also  in  consequence,  as  I  imagine, 
of  this  defective  conception  of  their  science,  that 
English  Economists  have  not  been  as  fertile  as  they 
should  have  been  in  verifying  it.  They  have  been 
too  content  to  remain  in  the  "  abstract,"  and  to 
shrink  from  concrete  notions,  because  they  could  not 
but  feel  that  many  of  the  most  obvious  phenomena 
of  many  nations  did  not  look  much  like  their  abstrac- 
tions. Whereas  in  the  societies  with  which  the 
science  is  really  concerned,  an  almost  infinite  harvest 
of  verification  was  close  at  hand,  ready  to  be  gathered 
in  ;  and  because  it  has  not  been  used,  much  con- 
fidence in  the  science  has  been  lost,  and  it  is  thought 
"  to  be  like  the  stars  which  give  no  good  light  because 
they  are  so  high  ". 

Of  course  this  reasoning  implies  that  the  bound- 
aries of  this  sort  of  Political  Economy  are  arbitrary, 
and  might  be  fixed  here  or  there.  But  this  is  already 
implied  when  it  is  said  that  Political  Economy  is 
an  abstract  science.     All  abstractions  are  arbitrary  ; 


24  Economic  Studies. 

they  are  more  or  less  convenient  fictions  made  by  the 
mind  for  its  own  purposes.  An  abstract  idea  means  a 
concrete  fact  or  set  of  facts  minus  something  thrown 
away.  The  fact  or  set  of  facts  were  made  by 
nature ;  but  how  much  you  will  throw  aside  of  them 
and  how  much  you  will  keep  for  consideration  you 
settle  for  yourself.  There  may  be  any  number  of 
political  economies  according  as  the  subject  is 
divided  off  in  one  way  or  in  another,  and  in  this 
way  all  may  be  useful  if  they  do  not  interfere  with 
one  another,  or  attempt  to  rule  further  than  they  are 
proved. 

The  particular  Political  Economy  which  I  have 
been  calling  the  English  Political  Economy,  is  that 
of  which  the  first  beginning  was  made  by  Adam 
Smith.  But  what  he  did  was  much  like  the  rough 
view  of  the  first  traveller  who  discovers  a  country  ; 
he  saw  some  great  outlines  well,  but  he  mistook 
others  and  left  out  much.  It  was  Ricardo  who 
made  the  first  map ;  who  reduced  the  subjects 
into  consecutive  shape,  and  constructed  what  you 
can  call  a  science.  Few  greater  efforts  of  mind  have 
been  made,  and  not  many  have  had  greater  fruits. 
From  Ricardo  the  science  passed  to  a  whole  set  of 
minds — James  Mill,  Senior,  Torrens,  MacCulloch, 
and  others,  who  busied  themselves  with  working 
out  his  ideas,  with  elaborating  and  with  completing 
them.  For  five  and  twenty  years  the  English  world 
was  full  of  such  discussions.  Then  Mr.  J.  S.  Mill 
— the  Mr.  Mill  whom  the  present  generation  know 
so  well,  and  who  has  had  so  much  influence — shaped 
with  masterly  literary  skill  the  confused  substance 


The  Postulates  of  Political  Economy.  25 

of  those  discussions  into  a  compact  whole.  He  did 
not  add  a  great  deal  which  was  his  own,  and  some 
of  what  is  due  to  him  does  not  seem  to  me  of  great 
value.  But  he  pieced  the  subjects  together,  showed 
where  what  one  of  his  predecessors  had  done  had 
fitted  on  to  that  of  another,  and  adjusted  this  science 
to  other  sciences  according  to  the  notions  of  that 
time.  To  many  students  his  book  is  the  Alpha  and 
Omega  of  Political  Economy ;  they  know  little  of 
what  was  before,  and  imagine  little  which  can  come 
after  in  the  way  of  improvement.  But  it  is  not 
given  to  any  writer  to  occupy  such  a  place.  Mr. 
Mill  would  have  been  the  last  to  claim  it  for  himself. 
He  well  knew  that,  taking  his  own  treatise  as  the 
standard,  what  he  added  to  Political  Economy  was 
not  a  ninth  of  what  was  due  to  Ricardo,  and  that 
for  much  of  what  is  new  in  his  book  he  was  rather 
the  Secretaire  de  la  Redaction,  expressing  and  formu- 
lating the  current  views  of  a  certain  world,  than  pro- 
ducing by  original  thought  from  his  own  brain.  And 
his  remoteness  from  mercantile  life,  and  I  should 
say  his  enthusiastic  character,  eager  after  things 
far  less  sublunary  than  money,  made  him  little  likely 
to  give  finishing  touches  to  a  theory  of  "  the  great 
commerce  ".  In  fact  he  has  not  done  so  ;  much  yet 
remains  to  be  done  in  it  as  in  all  sciences.  Mr.  Mill, 
too,  seems  to  me  open  to  the  charge  of  having 
widened  the  old  Political  Economy  either  too  much 
or  not  enough.  If  it  be,  as  I  hold,  a  theory  proved 
of,  and  applicable  to,  particular  societies  only,  much 
of  what  is  contained  in  Mr.  Mill's  book  should  not  be 
there ;    if  it  is,  on  the  contrary,   a  theory  holding 


26  Economic  Studies. 

good  for  all  societies,  as  far  as  they  are  concerned 
with  wealth,  much  more  ought  to  be  there,  and 
much  which  is  there  should  be  guarded  and  limited. 
English  Political  Economy  is  not  a  finished  and 
completed  theory,  but  the  first  lines  of  a  great 
analysis  which  has  worked  out  much,  but  which  still 
leaves  much  unsettled  and  unexplained. 

There  is  nothing  capricious,  we  should  observe, 
in  this  conception  of  Political  Economy,  nor,  though 
it  originated  in  England,  is  there  anything  specially 
English  in  it.  It  is  the  theory  of  commerce,  as 
commerce  tends  more  and  more  to  be  when  capital 
increases  and  competition  grows.  England  was  the 
first — or  one  of  the  first — countries  to  display  these 
characteristics  in  such  vigour  and  so  isolated  as  to 
suggest  a  separate  analysis  of  them,  but  as  the  world 
goes  on,  similar  characteristics  are  being  evolved  in  one 
society  after  another.  A  similar  money  market,  a  simi- 
lar competing  trade  based  on  large  capital,  gradually 
tends  to  arise  in  all  countries.  As  "  men  of  the  world  " 
are  the  same  everywhere,  so  the  great  commerce  is 
the  same  everywhere.  Local  peculiarities  and  ancient 
modifying  circumstances  fall  away  in  both  cases  ; 
and  it  is  of  this  one  and  uniform  commerce  which 
grows  daily,  and  which  will  grow,  according  to  every 
probability,  more  and  more,  that  English  Political 
Economy  aspires  to  be  the  explanation. 

And  our  Political  Economy  does  not  profess  to 
prove  this  growing  world  to  be  a  good  world — far 
less  to  be  the  best.  Abroad  the  necessity  of  contesting 
socialism  has  made  some  writers  use  the  conclusions 
brought  out  by  our  English  science  for  that  object. 


The  Postulates  of  Political  Economy.  27 

But  the  aim  of  that  science  is  far  more  humble ;  it 
says  these  and  these  forces  produce  these  and  these 
effects,  and  there  it  stops.  It  does  not  profess  to  give 
a  moral  judgment  on  either;  it  leaves  it  for  a  higher 
science,  and  one  yet  more  difficult,  to  pronounce 
what  ought  and  what  ought  not  to  be. 

The  first  thing  to  be  done  for  English  Political 
Economy,  as  I  hold,  is  to  put  its  aim  right.  So 
long  as  writers  on  it  do  not  clearly  see,  and  as 
readers  do  not  at  all  see,  the  limits  of  what  they  are 
analysing,  the  result  will  not  satisfy  either.  The 
science  will  continue  to  seem  what  to  many  minds  it 
seems  now,  proved  .perhaps  but  proved  in  nubibus ; 
true,  no  doubt,  somehow  and  somewhere,  but  that 
somewhere  a  terra  incognita,  and  that  somehow  an 
unknown  quantity. — As  a  help  in  this  matter  I  pro- 
pose to  take  the  principal  assumptions  of  Political 
Economy  one  by  one,  and  to  show,  not  exhaustively, 
for  that  would  require  a  long  work,  but  roughly, 
where  each  is  true  and  where  it  is  not.  We  shall 
then  find  that  our  Political  Economy  is  not  a 
questionable  thing  of  unlimited  extent,  but  a  most 
certain  and  useful .  thing  of  limited  extent.  By 
marking  the  frontier  of  our  property  we  shall  learn 
its  use,  and  we  shall  have  a  positive  and  reliable 
basis  for  estimating  its  value. 


28 


I. 

THE  TRANSFERABILITY  OF  LABOUR. 

The  first  assumption  which  I  shall  take  is  that 
which  is  perhaps  oftener  made  in  our  economic 
reasonings  than  any  other,  namely,  that  labour 
(masculine  labour,  I  mean)  and  capital  circulate 
readily  within  the  limits  of  a  nation  from  employ- 
ment to  employment,  leaving  that  in  which  the 
remuneration  is  smaller  and  going  to  that  in  which 
it  is  greater.  No  assumption  can  be  better  founded, 
as  respects  such  a  country  as  England,  in  such  an 
economic  state  as  our  present  one.  A  rise  in  the 
profits  of  capital,  in  any  trade,  brings  more  capital 
to  it  with  us  now-a-days — I  do  not  say  quickly,  for 
that  would  be  too  feeble  a  word,  but  almost  instan- 
taneously. If,  owing  to  a  high  price  of  corn,  the 
corn  trade  on  a  sudden  becomes  more  profitable  than 
usual,  the  bill-cases  of  bill-brokers  and  bankers  are 
in  a  few  days  stuffed  with  corn  bills — that  is  to  say, 
the  free  capital  of  the  country  is  by  the  lending 
capitalists,  the  bankers  and  bill-brokers,  transmitted 
where  it  is  most  wanted.  When  the  price  of  coal 
and  iron  rose  rapidly  a  few  years  since,  so  much 
capital  was  found  to  open  new  mines  and  to  erect 
new  furnaces  that  the  profits  of  the  coal  and  iron 
trades  have  not  yet  recovered  it.     In  this  case  the 


The  Postulates  of  Political  Economy.  29 

influence  of  capital  attracted  by  high  profits  was  not 
only  adequate,  but  much  more  than  adequate :  in- 
stead of  reducing  these  profits  only  to  an  average 
level,  it  reduced  them  below  that  level ;  and  this 
happens  commonly,  for  the  speculative  enterprise 
which  brings  in  the  new  capital  is  a  strong,  eager, 
and  rushing  force,  and  rarely  stops  exactly  where 
it  should  Here  and  now  a  craving  for  capital  in 
a  trade  is  almost  as  sure  to  be  followed  by  a 
plethora  of  it  as  winter  to  be  followed  by  summer. 
Labour  does  not  flow  so  quickly  from  pursuit  to 
pursuit,  for  man  is  not  so  easily  moved  as  money 
— but  still  it  moves  very  quickly.  Patent  statis- 
tical facts  show  what  we  may  call  "the  tides" 
of  our  people.  Between  the  years  shown  by  the 
last  census,  the  years  1861  and  1871,  the  popula- 
tion of 

The  Northern  counties  increased  23  per  cent. 
Yorkshire  ,,         19        ,, 

North-western  counties         „         14        ,, 
London  „         16        ,, 

While  that  of 

The  South-western  counties  only  increased  2  per  cent. 
Eastern  ,,  d        7        >> 

North  Midland  ,,  „        9        ,, 

— though  the  fertility  of  marriages  is  equal.  The 
set  of  labour  is  steadily  and  rapidly  from  the 
counties  where  there  is  only  agriculture  and  little 
to  be  made  of  new  labour,  towards  those  where 
there  are  many  employments  and  where  much  is 
to  be  made  of  it. 

No  doubt  there  are,  even  at  present  in  England, 


30  Bconomic  Studte^t. 

many  limitations  to  this  tendency,  both  of  capital 
and  of  labour,  which  are  of  various  degrees  of  im- 
portance, and  which  need  to  be  considered  for 
various  purposes.  There  is  a  "  friction,"  but  still 
it  is  only  a  "  friction  "  ;  its  resisting  power  is  mostly 
defeated,  and  at  a  first  view  need  not  be  regarded. 
But  taking  the  world,  present  and  past,  as  a  whole, 
the  exact  contrary  is  true ;  in  most  ages  and  coun- 
tries this  tendency  has  been  not  victorious  but 
defeated ;  in  some  cases  it  can  scarcely  be  said  even 
to  have  existed,  much  less  to  have  conquered.  If 
you  take  at  random  a  country  in  history,  the  im- 
mense chances  are  that  you  will  find  this  tendency 
either  to  be  altogether  absent,  or  not  at  all  to  prevail 
as  it  does  with  us  now.  This  primary  assumption 
of  our  Political  Economy  is  not  true  everywhere 
and  always,  but  only  in  a  few  places  and  a  few 
times. 

The  truth  of  it  depends  on  the  existence  of  con- 
ditions which,  taken  together,  are  rarely  satisfied. 
Let  us  take  labour  first,  as  it  is  the  older  and  simpler 
of  the  two.  First,  there  must  be  "employments," 
between  which  labour  is  to  migrate  ;  and  this  is  not 
true  at  all  of  the  primitive  states  of  society.  We 
are  used  to  a  society  which  abounds  in  felt  wants 
that  it  can  satisfy,  and  where  there  are  settled  com- 
binations of  men — trades  as  we  call  them — each 
solely  occupied  in  satisfying  some  one  of  them.  But 
in  primitive  times  nothing  at  all  like  this  exists. 
The  conscious  wants  of  men  are  few,  the  means  of 
supplying  them  still  fewer,  and  the  whole  society 
homogeneous — one    man    living   much    as   another. 


The  Postulates  of  Political  Economy.  ^t 

Civilisation  is  a  shifting  mixture  of  many  colours, 
but  barbarism  was  and  is  of  a  dull  monotony,  hardly 
varying  even  in  shade. 

A  picture  or  two  of  savage  tribes  brings  this  home 
to  the  mind  better  than  abstract  words.  Let  us 
hear  Mr.  Catlin's  description  of  a  favourite  North 
American  tribe,  with  which  he  means  us  to  be 
much  pleased:  "The  Mandans,  like  all  other  tribes, 
live  lives  of  idleness  and  leisure,  and  of  course 
devote  a  great  deal  of  time  to  their  amusements,  of 
which  they  have  a  great  variety.  Of  these  dancing 
is  one  of  the  principal,  and  may  be  seen  in  a  variety 
of  forms :  such  as  the  buffalo  dance,  the  boasting 
dance,  the  begging  dance,  the  scalp  dance,  and  a 
dozen  other  dances,  all  of  which  have  their  peculiar 
characters  and  meanings  and  objects."  ^ 

Then  he  describes  the  "starts  and  jumps"  of 
these  dances,  and  goes  on  :  "  Buffaloes,  it  is  well 
known,  are  a  sort  of  roaming  creatures  congregat- 
ing occasionally  in  huge  masses,  and  strolling  away 
about  the  country  from  east  to  west  or  from  north 
to  south,  or  just  where  their  whims  or  fancies  may 
lead  them ;  and  the  Mandans  are  sometimes  by  this 
means  most  unceremoniously  left  without  anything 
to  eat,  and  being  a  small  tribe  and  unwilling  to  risk 
their  lives  by  going  far  from  home  in  the  face  of 
their  more  powerful  enemies,  are  oftentimes  left 
almost  in  a  state  of  starvation.  In  any  emergency 
of  this  kind  every  man  musters  and  brings  out  of 
his  lodge  his  mask  (the  skin  of  a  buffalo's  head  with 

'  North  American  Indians  ,  Letter  i8 


3^  Economic  Studies. 


the  horns  on),  which  he  is  obliged  to  keep  in  readi- 
ness for  the  occasion ;  and  then  commences  the 
buffalo  dance  of  which  I  have  spoken,  which  is  held 
for  the  purpose  of  making  *  buffalo  come,'  as  they 
term  it, — of  inducing  the  buffalo  herds  to  change 
the  direction  of  their  wanderings,  and  bend  their 
course  towards  the  Mandan  village  and  graze  about 
on  the  beautiful  hills  and  bluffs  in  its  vicinity,  where 
the  Mandans  can  shoot  them  down  and  cook  them 
as  they  want  them  for  food.  For  the  most  part  of 
the  year  the  young  warriors  and  hunters  by  riding 
out  a  mile  or  two  from  the  village  can  kill  meat  in 
abundance ;  and  sometimes  large  herds  of  these  ani- 
mals may  be  seen  grazing  in  full  view  of  the  village. 
There  are  other  seasons  also  when  the  young  men  have 
ranged  about  the  country,  as  far  as  they  are  willing  to 
risk  their  lives  on  account  of  their  enemies,  without 
finding  meat.  This  sad  intelligence  is  brought  back 
to  the  chiefs  and  doctors,  who  sit  in  solemn  council 
and  consult  on  the  most  expedient  measures  to  be 
taken  until  they  are  sure  to  decide  the  old  and  only 
expedient  '  which  has  never  failed '.  This  is  the 
buffalo  dance,  which  is  incessantly  continued  till 
'  buffalo  come,'  and  which  the  whole  village  by 
relays  of  dancers  keeps  up  in  succession.  And  when 
the  buffaloes  are  seen,  there  is  a  brisk  preparation 
for  the  chase — a  great  hunt  takes  place.  The 
choicest  pieces  of  the  carcase  are  sacrificed  to 
the  Great  Spirit,  and  then  a  surfeit  or  a  carouse. 
These  dances  have  sometimes  been  continued  for 
two  or  three  weeks  until  the  joyful  moment  when 
buffaloes    made    their    appearance.      And    so    they 


The  Postulates  of  Political  Economy.  33 

'never  fail,'  as  the  village  thinks,  to  bring  the  buf- 
faloes in." 

Such  is  the  mode  of  gaining  the  main  source  of 
existence,  without  which  the  tribe  would  starve. 
And  as  to  the  rest  we  are  told :  "  The  principal 
occupations  of  the  women  in  this  village  consist  in 
procuring  wood  and  water,  in  cooking,  dressing 
robes  and  other  skins,  in  drying  meat  and  wild  fruits, 
and  raising  maize  ".  ^ 

In  this  attractive  description  there  is  hardly  any 
mention  of  male  labour  at  all ;  the  men  hunt,  fight, 
and  amuse  themselves,  and  the  women  do  all  the 
rest. 

And  in  the  lowest  form  of  savage  life,  in  the  stone 
age,  the  social  structure  must  have  been  still  more 
uniform,  for  there  were  still  less  means  to  break  or 
vary  it.  The  number  of  things  which  can  be  made 
with  a  flint  implement  is  much  greater  than  one  would 
have  imagined,  and  savages  made  more  things  with 
it  than  any  one  would  make  now.  Time  is  nothing 
in  the  savage  state,  and  protracted  labour,  even  with 
the  worst  instrument,  achieves  much,  especially  when 
there  are  no  other  means  of  achieving  anything. 
But  there  is  no  formal  division  of  employments — 
no  cotton  trade,  no  iron  trade,  no  woollen  trade. 
There  are  beginnings  of  a  division,  of  course,  but, 
as  a  rule,  every  one  does  what  he  can  at  every- 
thing. 

In  much  later  times  the  same  uniformity  in  the 
structure  of  society  still   continues.     We  all   know 

1  Letter  17. 

3 


34  Economic  Studies. 

from  childhood  how  simple  is  the  constitution  of  a 
pastoral  society.  As  we  see  it  in  the  Pentateuch  it 
consists  of  one  family,  or  a  group  of  families,  pos- 
sessing flocks  and  herds,  on  which,  and  by  which, 
they  live.  They  have  no  competing  employments  ; 
no  alternative  pursuits.  What  manufactures  there 
are,  are  domestic,  are  the  work  of  women  at  all  times, 
and  of  men,  of  certain  men,  at  spare  times.  No 
circulation  of  labour  is  then  conceivable,  for  there  is 
no  circle;  there  is  no  group  of  trades  round  which 
to  go,  for  the  whole  of  industry  is  one  trade. 

Many  agricultural  communities  are  exactly  similar. 
The  pastoral  communities  have  left  the  life  of  move- 
ment, which  is  essential  to  a  subsistence  on  the 
flocks  and  herds,  and  have  fixed  themselves  on  the 
soil.  But  they  have  hardly  done  more  than  change 
one  sort  of  uniformity  for  another.  They  have  be- 
come peasant  proprietors — combining  into  a  village, 
and  holding  more  or  less  their  land  in  common,  but 
having  no  pursuit  worth  mentioning,  except  tillage. 
The  whole  of  their  industrial  energy — domestic  clothes- 
making  and  similar  things  excepted — is  absorbed  in 
that. 

No  doubt  in  happy  communities  a  division  of 
labour  very  soon  and  very  naturally  arises,  and  at 
first  sight  we  might  expect  that  with  it  a  circulation 
of  labour  would  begin  too.  But  an  examination  of 
primitive  society  does  not  confirm  this  idea ;  on  the 
contrary,  it  shows  that  a  main  object  of  the  social 
organisation  which  then  exists,  is  to  impede  or 
prevent  that  circulation.  And  upon  a  little  thought 
the  reason  is  evident.     There  is  no  paradox  in  the 


The  Postulates  of  Political  Economy.  35 

notion ;  early  nations  were  not  giving  up  an  ad- 
vantage which  they  might  have  had ;  the  good 
which  we  enjoy  from  the  circulation  of  labour  was 
unattainable  by  them  ;  all  they  could  do  was  to 
provide  a  substitute  for  it — a  means  of  enjoying  the 
advantages  of  the  division  of  labour  without  it, — and 
this  they  did.  We  must  carry  back  our  minds  to 
the  circumstances  of  primitive  society  before  we 
can  comprehend  the  difficulty  under  which  they 
laboured,  and  see  how  entirely  it  differs  from  any 
which  we  have  to  meet  now. 

A  free  circulation  of  labour  from  employment  to 
employment  involves  an  incessant  competition  between 
man  and  man,  which  causes  constant  quarrels, — some 
of  which,  as  we  see  in  the  daily  transactions  of  trades 
unions,  easily  run  into  violence ;  and  also  a  constant 
series  of  new  bargains,  one  differing  from  another, 
some  of  which  are  sure  to  be  broken,  or  said  to  be  so, 
which  makes  disputes  of  another  kind.  The  peace 
of  society  was  exposed  in  early  times  to  greater 
danger  from  this  source  than  now,  because  the 
passions  of  men  were  then  less  under  control  than 
now.  "  In  the  simple  and  violent  times,"  as  they 
have  been  well  called,  "which  we  read  of  in  our 
Bibles,"  people  struck  one  another,  and  people  killed 
one  another,  for  very  little  matters  as  we  should  think 
them.  And  the  most  efficient  counteractive  machin- 
ery which  now  preserves  that  peace,  then  did  not 
exist.  We  have  now  in  the  midst  of  us  a  formed, 
elaborate,  strong  government,  which  is  incessantly 
laying  down  the  best  rules  which  it  can  find  to 
prevent  trouble  under  changing  circumstances,  and 


36  Economic  Studies. 

which  constantly  applies  a  sharp  pervading  force 
running  through  society  to  prevent  and  punish 
breaches  of  those  rules.  We  are  so  familiar  with 
the  idea  of  a  government  inherently  possessing  and 
daily  exercising  both  executive  and  legislative  power, 
that  we  scarcely  comprehend  the  possibility  of  a 
nation  existing  without  them.  But  if  we  attend  to 
the  vivid  picture  given  in  the  Book  of  Judges  of 
an  early  stage  in  Hebrew  society,  we  shall  see 
that  there  was  then  absolutely  no  legislative  power, 
and  only  a  faint  and  intermittent  executive  power. 
The  idea  of  law  making,  the  idea  of  making  new 
rules  for  new  circumstances,  would  have  been  as 
incomprehensible  to  Gideon  or  Abimelech  as  the 
statutes  at  large  to  a  child  of  three  years  old. 
They  and  their  contemporaries  thought  that  there 
was  an  unalterable  law  consecrated  by  religion  and 
confirmed  by  custom,  which  they  had  to  obey,  but 
they  could  not  have  conceived  an  alteration  of  it 
except  as  an  act  of  wickedness  —  a  worshipping 
of  Baal.  And  the  actual  coercive  power  available 
for  punishing  breaches  of  it  was  always  slight,  and 
often  broken.  One  "judge,"  or  ruler,  arises  after 
another,  sometimes  in  one  tribe  and  place,  and 
sometimes  in  another,  and  exercises  some  kind  of 
jurisdiction,  but  his  power  is  always  limited ;  there 
is  no  organisation  for  transmitting  it,  and  often  there 
is  no  such  person — no  king  in  Israel  whatever. 

The  names  and  the  details  of  this  book  may  or 
may  not  be  historical,  but  its  spirit  is  certainly  true. 
The  peace  of  society  then  reposed  on  a  confused 
sentiment,  in   which   respect   for   law,    as   such — at 


The  Postulates  of  Political  Economy.  37 

least  law  in  our  usual  modern  sense — was  an  incon- 
siderable element,  and  of  which  the  main  components 
were  a  coercive  sense  of  ingrained  usage,  which  kept 
men  from  thinking  what  they  had  not  before  thought, 
and  from  doing  what  they  had  not  before  done ;  a 
vague  horror  that  something,  they  did  not  well  know 
what,  might  happen  if  they  did  so ;  a  close  religion 
which  filled  the  air  with  deities  who  were  known  by 
inherited  tradition,  and  who  hated  uninherited  ways; 
and  a  submission  to  local  opinion  inevitable  when 
family  and  tribe  were  the  main  props  of  life, — when 
there  really  was  "  no  world  without  Verona's  walls,"  ^ 
— when  every  exile  was  an  outcast,  expelled  from 
what  was  then  most  natural,  and  scarcely  finding 
an  alternative  existence. 

No  doubt  this  sentiment  was  in  all  communities 
partially  reinforced  by  police.  Even  at  the  time 
of  the  "Judges,"  there  were  no  doubt  "local  au- 
thorities," as  we  should  now  say,  who  forcibly  main- 
tained some  sort  of  order,  even  when  the  central 
power  was  weakest.  But  the  main  support  of  these 
authorities  was  the  established  opinion  ;  they  had  no 
military  to  call  in,  no  exterior  force  to  aid  them  ;  if 
the  fixed  sentiment  of  the  community  was  not  strong 
enough  to  aid  them,  they  collapsed  and  failed.  But 
that  fixed  sentiment  would  have  been  at  once 
weakened,  if  not  destroyed,  by  a  free  circulation  of 
labour,  which  is  a  spring  of  progress  that  is  favour- 
able to  new  ideas,  that  brings  in  new  inventions,  that 
prevents  the  son  being  where  his  father  was,  that 

'  "  Romeo  and  Juliet,"  iii.,  3. 


38  Economic  Studies. 


interrupts  the  traditions  of  generations  and  breaks 
inherited  feeling.  Besides  causing  new  sorts  of 
quarrels  by  creating  new  circumstances  and  new 
occasions,  this  change  of  men  from  employment  to 
employment  decomposes  the  moral  authority  which 
alone  in  this  state  of  society  can  prevent  quarrels 
or  settle  them.  Accordingly,  the  most  successful 
early  societies  have  forbidden  this  ready  change 
as  much  as  possible,  and  have  endeavoured,  as 
far  as  they  could,  to  obtain  the  advantages  of 
the  division  of  labour  without  it.  Sir  Henry  Maine, 
to  whom  this  subject  so  peculiarly  belongs,  and 
who  has  taught  us  so  much  more  on  it  than 
any  one  else,  shall  describe  the  industrial  ex- 
pedients of  primitive  society  as  he  has  seen  them 
still  surviving  in  India.  "There  is,"  he  says,  "yet 
another  feature  of  the  modern  Indian  cultivating 
group  which  connects  them  with  primitive  Western 
communities  of  the  same  kind.  I  have  several  times 
spoken  of  them  as  organised  and  self-acting.  They, 
in  fact,  include  a  nearly  complete  establishment  of 
occupations  and  trades  for  enabling  them  to  continue 
their  collective  life  without  assistance  from  any 
person  or  body  external  to  them.  Besides  the 
headmen  or  council,  exercising  quasi-judicial,  quasi- 
legislative  power,  they  contain  a  village  police,  now 
recognised  and  paid  in  certain  provinces  by  the 
British  Government.  They  include  several  families 
of  hereditary  traders ;  the  blacksmith,  the  harness- 
maker,  the  shoemaker.  The  Brahman  is  also  found 
for  the  performance  of  ceremonies,  and  even  the 
dancing-girl  for  attendance  at  festivities.     There  is 


The  Postulates  of  Political  Economy.  39 

invariably  a  village  accountant,  an  important  person 
among  an  unlettered  population,  so  important,  in- 
deed, and  so  conspicuous,  that,  according  to  reports 
current  in  India,  the  earliest  English  functionaries 
engaged  in  settlements  of  land  were  occasionally  led, 
by  their  assumption  that  there  must  be  a  single 
proprietor  somewhere,  to  mistake  the  accountant  for 
the  owner  of  the  village,  and  to  record  him  as  such 
in  the  official  register.  But  the  person  practising 
any  one  of  these  hereditary  employments  is  really  a 
servant  of  the  community  as  well  as  one  of  its  com- 
ponent members.  He  is  sometimes  paid  by  an 
allowance  in  grain,  more  generally  by  the  allotment 
to  his  family  of  a  piece  of  land  in  hereditary  posses- 
sion. Whatever  else  he  may  demand  for  the  wares 
he  produces  is  limited  by  a  fixed  price  very  rarely 
departed  from."  ^ 

To  no  world  could  the  free  circulation  of  labour, 
as  we  have  it  in  England,  and  as  we  assume  it  in 
our  Political  Economy,  be  more  alien,  and  in  none 
would  it  have  been  more  incomprehensible.  In  this 
case,  as  in  many  others,  what  seems  in  later  times 
the  most  natural  organisation  is  really  one  most 
difficult  to  create,  and  it  does  not  arise  till  after 
many  organisations  which  seem  to  our  notions  more 
complex  have  preceded  it  and  perished.  The  village 
association  of  India,  as  Sir  Henry  Maine  describes  it, 
seems  a  much  more  elaborate  structure,  a  much  more 
involved  piece  of  workmanship,  than  a  common 
English   village  where  every  one  chooses   his  own 

'  Village  Conimunities,  Lecture  iv. 


40  Economic  Studies. 

calling,  and  where  there  are  no  special  rules  for  each 
person,  and  where  a  single  law  rules  all.  But  in 
fact  our  organisation  is  the  more  artificial  because  it 
presupposes  the  pervading  intervention  of  an  effectual 
Government — the  last  triumph  of  civilisation,  and 
one  to  which  early  times  had  nothing  comparable. 
In  expecting  what  we  call  simple  things  from  early 
ages,  we  are  in  fact  expecting  them  to  draw  a  circle 
without  compasses,  to  produce  the  results  of  civilisa- 
tion when  they  have  not  attained  civilisation. 

One  instance  of  this  want  of  simplicity  in  early 
institutions,  which  has,  almost  more  than  any  other, 
impaired  the  free  transit  of  labour,  is  the  complexity 
of  the  early  forms  of  landholding.  In  a  future  page 
I  hope  to  say  something  of  the  general  effects  of 
this  complexity,  and  to  compare  it  with  the  assump- 
tions as  to  ownership  in  land  made  by  Ricardo  and 
others.  I  am  here  only  concerned  with  it  as  affect- 
ing the  movement  of  men,  but  in  this  respect  its 
effect  has  been  incalculable.  As  is  now  generally 
known,  the  earliest  form  of  landowning  was  not  in- 
dividual holding,  but  tribal  owning.  In  the  old 
contracts  of  Englishmen  with  savages  nothing  was 
commoner  than  for  the  king  or  chief  to  sell  tracts 
of  land, — and  the  buyers  could  not  comprehend  that 
according  to  native  notions  he  had  no  right  to  do 
so,  that  he  could  not  make  a  title  to  it,  and  that 
according  to  those  notions  there  was  no  one  who 
could.  Englishmen  in  all  land  dealings  looked  for 
some  single  owner,  or  at  any  rate  some  small 
number  of  owners,  who  had  an  exceptional  right 
over    particular    pieces    of    land  ;    they    could    not 


The  Postulates  of  Political  Economy.  41 

conceive  the  supposed  ownership  of  a  tribe,  as  in 
New  Zealand,  or  of  a  village  in  India,  over  large 
tracts.  Yet  this  joint  stock  principle  is  that  which 
has  been  by  far  the  commonest  in  the  world,  and 
that  which  the  world  began  with.  And  not  with- 
out good  reason.  In  the  early  ages  of  society,  it 
would  have  been  impossible  to  maintain  the  ex- 
clusive ownership  of  a  few  persons  in  what  seems  at 
first  sight  an  isqual  gift  to  all — a  thing  to  which 
every  one  has  the  same  claim.  There  was  then  no 
distinct  government  apart  from  and  above  the  tribe 
any  more  than  among  New  Zealanders  now.  There 
was  no  compulsory  agency  which  could  create  or 
preserve  exclusive  ownership  of  the  land,  even  if 
it  wished.  And  of  course  it  could  not  have  been 
wished,  for  though  experience  has  now  conclusively 
shown  that  such  exclusive  ownership  is  desirable 
for  and  beneficial  to  the  nation  as  a  whole,  as 
well  as  to  the  individual  owner,  no  theorist  would 
have  been  bold  enough  to  predict  this  beforehand. 
This  monopoly  is  almost  a  paradox  after  experi- 
ence, and  it  would  have  seemed  monstrous  folly 
before  it.  Indeed,  the  idea  of  a  discussion  of  it,  is 
attributing  to  people  in  the  year  1000  B.C.  the 
notions  of  people  in  the  year  1800  a.d.  Common 
ownership  was  then  irremediable  and  inevitable ;  no 
alternative  for  it  was  possible,  or  would  then  have 
been  conceivable.  But  it  is  in  its  essence  opposed 
to  the  ready  circulation  of  labour.  Few  things  fix  a 
man  so  much  as  a  share  in  a  property  which  is  fixed 
by  nature ;  and  common  ownership,  wherever  it  pre- 
vails, gives  the  mass  of  men  such  a  share. 


42  Economic  Studies. 


And  there  is  another  force  of  the  same  tendency 
which  does  not  act  so  widely,  but  which  when  it 
does  act  is  even  stronger — in  many  cases  is  omni- 
potent. This  is  the  disposition  of  many  societies 
to  crystallise  themselves  into  specialised  groups,  which 
are  definite  units,  each  with  a  character  of  its  own,  and 
are  more  or  less  strictly  hereditary.  Sir  Henry  Maine 
has  described  to  us  how  in  an  Indian  village  the  black- 
smith is  hereditary,  and  the  harness-maker,  and  the 
shoemaker, — and  this  is  natural,  for  every  trade  has  its 
secrets,  which  make  a  kind  of  craft  or  "  mystery  "  of  it, 
and  which  must  be  learnt  by  transmission  or  not  at  all. 
The  first  and  most  efficient  kind  of  apprenticeship  is 
that  by  birth;  the  father  teaches  his  son  that  by  which 
he  makes  his  living,  almost  without  knowing  it ;  the 
son  picks  up  the  skill  which  is  in  the  air  of  the  house, 
almost  without  feeling  that  he  is  doing  so.  Even  now 
we  see  that  there  are  city  families,  and  university  and 
legal  families, — families  where  a  special  kind  of 
taste  and  knowledge  are  passed  on  in  each  genera- 
tion by  tradition,  and  which  in  each  have  in  that 
respect  an  advantage  over  others.  In  most  ages 
most  kinds  of  skilled  labour  have  shown  a  disposi- 
tion to  intensify  this  advantage  by  combination — 
to  form  a  bounded  and  exclusive  society,  guild, 
trades  union,  or  whatever  it  may  be  called,  which 
keeps  or  tries  to  keep  in  each  case  to  itself  the 
rich  secret  of  the  inherited  art.  And  even  when  no 
pains  are  taken,  each  special  occupation,  after  it  gains 
a  certain  size,  tends  to  form  itself  into  a  separate 
group.  Each  occupation  has  certain  peculiar  char- 
acteristics which  help  to  success  in  it,   and  which, 


The  Postulates  of  Political  Economy.  43 


therefore,  it  fosters  and  develops;  and  in  a  subtle 
way  these  traits  collect  together  and  form  a  group- 
character  analogous  to  a  national  character.  The 
process  of  caste-making  is  often  thought  to  be  an 
old-world  thing  which  came  to  an  end  when  certain 
old  castes  were  made  and  fixed  before  the  dawn  of 
history.  But  in  fact  the  process  has  been  actively 
at  work  in  recent  times,  and  has  hardly  yet  died  out. 
Thus  in  Cashmere,  where  the  division  of  castes  is 
already  minute,  Mr.  Drew  tells  us  that  of  the  Batals 
— a  class  at  the  very  bottom  of  the  scale,  "  whose 
trade  it  is  to  remove  and  skin  carcasses,  and  to  cure 
leather," — he  has  heard  "  that  there  are  two  classes ; 
so  apt  are  communities  in  India  to  divide  and  to  sub- 
divide, to  perpetuate  differences,  and  to  separate 
rather  than  amalgamate.  The  higher  Batals  follow 
the  Mohammedan  rules  as  to  eating,  and  are  allowed 
some  fellowship  with  the  other  Mohammedans. 
The  lower  Batals  eat  carrion,  and  would  not  bear 
the  name  of  Mohammedans  in  the  mouths  of  others, 
though  they  might  call  themselves  so."  ^  Just  so, 
Sir  W.  Hunter  says  that  "the  Brahmans  of  Lower 
Bengal  bore  to  the  Brahmans  of  Oudh  the  same 
relation  that  the  landed  gentry  of  Canada  or 
Australia  bears  to  the  landed  gentry  of  England. 
Each  is  an  aristocracy,  both  claim  the  title  of 
Esquire,  but  each  is  composed  of  elements  whose 
social  history  is  widely  different,  and  the  home 
aristocracy  never  regards  the  successful  settlers  as 
equal  in  rank.     The  Brahmans  of  the  midland  land 

Jummoo  and  Kashlnir  Territories,  chap,  viii.,  by  Frederick 
Drew. 


44  Economic  Studies, 


went  further ;  they  declared  the  Brahmans  of  Lower 
Bengal  inferior  not  only  in  the  social  scale,  but  in 
religious  capabilities.  To  this  day  many  of  the 
north  country  Brahmans  do  not  eat  with  the  Brah- 
mans of  the  lower  valley,  and  convicted  felons 
from  the  north-west  will  suffer  repeated  floggings 
in  jail,  for  contumacy,  rather  than  let  rice  cooked 
by  a  Bengal  Brahman  pass  their  lips."  ^  Caste- 
making  is  not  a  rare  act,  but  a  constantly  occurring 
act,  when  circumstances  aid  it,  and  when  the  human 
mind  is  predisposed  to  it. 

One  great  aid  to  this  process  is  the  mutual  ani- 
mosity of  the  different  groups.  "  What  one  nation 
hates,"  said  Napoleon,  "  is  another  nation ;  "  just  so, 
what  one  caste  hates  is  another  caste :  the  marked 
characteristics  of  each  form — by  their  difference — a 
certain  natural  basis  for  mutual  dislike.  There  is  an 
intense  disposition  in  the  human  mind — as  you  may 
see  in  any  set  of  schoolboys — to  hate  what  is  unusual 
and  strange  in  other  people,  and  each  caste  supplies 
those  adjoining  it  with  a  conspicuous  supply  of  what 
is  unusual.  And  this  hatred  again  makes  each  caste 
more  and  more  unlike  the  other,  for  every  one  wishes 
as  much  as  possible  to  distinguish  himself  from  the 
neighbouring  hated  castes  by  excelling  in  the  peculi- 
arities of  his  own  caste,  and  by  avoiding  theirs. 

In  the  ancient  parts  of  the  world  these  contrasts 
of  group  to  group  are  more  or  less  connected  for  the 
most  part  with  contrasts  of  race.  Very  often  the 
origin  of  the  caste — the  mental  tendency  which  made 

'  Annals  oj  Rural  Bengal,  by  Sir  W.  W.  Hunter,  chap.  iii. 


The  Postulates  of  Political  Economy.  45 

its  first  members  take  to  its  special  occupation — was 
some  inborn  peculiarity  of  race ;  and  at  other  times, 
as  successive  waves  of  conquest  passed  over  the 
country,  each  race  of  conquerors  connected  them- 
selves most  with,  and  at  last  were  absorbed  in,  the 
pre-existing  kind  of  persons  which  they  most  re- 
sembled, and  frequently  in  so  doing  hardened  into  an 
absolute  caste  what  was  before  a  half-joined  and 
incipient  group. 

Each  conquest,  too,  tends  to  make  a  set  of  out- 
casts—generally from  the  worst  part  of  the  previous 
population — and  these  become  "  hewers  of  wood  and 
drawers  of  water"  to  the  conquerors— that  is,  they 
are  an  outlying  and  degraded  race,  which  is  not  ad- 
mitted to  compete  or  mix  with  the  others,  and  which 
becomes  more  degraded  from  feeling  that  it  is  thus  in- 
ferior, and  from  being  confined  to  the  harder,  baser, 
and  less  teaching  occupations.  And  upon  these  un- 
happy groups  the  contempt  and  hatred  of  the  higher 
ones  tend  to  concentrate  themselves,  and,  like  most 
strong  sentiments  in  the  early  world,  thesefeelings  find 
for  themselves  a  religious  sanction.  To  many  villages 
in  India,  Sir  Henry  Maine  says,  there  are  attached 
a  class  of  "outsiders"  who  never  enter  the  village, 
or  only  enter  reserved  portions  of  it,  who  are  looked 
on  as  "  essentially  impure,"  "  whose  very  touch  is 
avoided  as  contaminating".  These  poor  people  are 
more  or  less  thought  to  be  "  accursed  "  ;  to  have  some 
taint  which  shows  that  the  gods  hate  them,  and  which 
justifies  men  in  hating  them  too,  and  in  refusing  to 
mix  with  them. 

The  result  of  these  causes  is,  that  many  ancient 


46  Economic  Studies. 


societies  are  complex  pieces  of  patchwork — bits  of 
contrasted  human  nature,  put  side  by  side.  They 
have  a  variegated  complexity,  which  modern  civilised 
States  mostly  want.  And  there  must  clearly  have 
been  an  advantage  in  this  organisation  of  labour — 
to  speak  of  it  in  modern  phrase — though  it  seems  to 
us  now  so  strange,  or  it  would  not  have  sprung  up 
independently  in  many  places  and  many  ages,  and 
have  endured  in  many  for  long  tracts  of  years.  This 
advantage,  as  we  have  seen,  was  the  gain  of  the 
division  of  labour  without  the  competition  which 
with  us  accompanies  it,  but  which  the  structure  of 
society  was  not  then  hard  enough  to  bear. 

No  doubt  we  must  not  push  too  far  this  notion  of 
the  rigidity  of  caste.  The  system  was  too  rigid  to 
work  without  some  safety-valves,  and  in  every  age 
and  place  where  that  system  prevails,  some  have 
been  provided.  Thus  in  India  we  are  told  "  a 
Brahmana  unable  to  subsist  by  his  duties  may  live  by 
the  duty  of  a  soldier ;  if  he  cannot  get  a  subsistence 
by  either  of  these  employments,  he  may  apply  to 
tillage  and  attendance  on  cattle,  or  gain  a  competence 
by  traffic,  avoiding  certain  commodities.  A  Kshatriya 
in  distress  may  subsist  by  all  these  means,  but  he 
must  not  have  recourse  to  the  highest  functions.  A 
Vaisya  unable  to  subsist  by  his  own  duties  may  de- 
scend to  the  servile  acts  of  a  S'udra  ;  and  a  S'lidra, 
not  finding  employment  by  waiting  on  men  of  the 
higher  classes,  may  subsist  by  handicrafts ;  besides 
the  particular  occupations  assigned  to  the  mixed 
classes,  they  have  the  alternative  of  following  that 
profession  which  regularly  belongs  to  the  class  from 


The  Postulates  of  Political  Economy.  47 

which  they  derive  their  origin  on  the  mother's  side;"  ^ 
and  so  on,  without  end. 

And  probably  it  is  through  these  supplementary 
provisions,  as  I  may  call  them,  that  the  system  of 
caste  ultimately  breaks  down  and  disappears.  It 
certainly  disappeared  in  ancient  Egypt  when  the 
compact  Roman  Government  was  strong  enough  to 
do  without  it,  and  when  a  change  of  religion  had 
removed  the  sanctions  which  fixed  and  consecrated 
it.  The  process  is  most  slow,  as  our  experience  in 
India  proves.  The  saying  that  "La  providence  a 
ses  aises  dans  le  temps  "  has  rarely  elsewhere  seemed 
so  true.  Still,  the  course  is  sure,  and  the  caste 
system  will  in  the  end  pass  away,  whenever  an 
efficient  substitute  has  been  made  for  it,  and  the  peace 
of  industry  secured  without  it. 

But  it  would  be  a  great  mistake  to  believe  that, 
whenever  and  wherever  there  is  an  efficient  external 
government  capable  of  enforcing  the  law,  and  of 
making  the  competitive  migration  of  labour  safe  and 
possible,  such  migration  of  itself  at  once  begins. 
There  is,  in  most  cases,  a  long  and  dreary  economic 
interval  to  be  passed  first.  In  many  countries,  the 
beginning  of  such  migration  is  for  ages  retarded  by 
the  want  of  another  requisite — the  want  of  external 
security.  We  have  come  in  modern  Europe  to  look 
on  nations  as  if  they  were  things  indestructible — at 
least,  on  large  nations.  But  this  is  a  new  idea,  and 
even  now  it  has  to  be  taken  with  many  qualifications. 
In  many  periods  of  history  it  has  not  been  true  at 

^  Colebrooke's  Essays,  vol.  ii.,  No.  vi.,  "  Indian  Classes". 


48  Economic  Studies. 

all ;  the  world  was  in  such  confusion,  that  it  was 
almost  an  even  chance  whether  nations  should 
continue,  or  whether  they  should  be  conquered  and 
destroyed.  In  such  times  the  whole  energy  of  the 
community  must  be  concentrated  on  its  own  defence  ; 
all  that  interferes  with  it  must  be  sacrificed,  if  it  is 
to  live.  And  the  most  efficient  mode  of  defending 
it  is  generally  a  feudal  system ;  that  is,  a  local 
militia  based  on  the  land,  where  each  occupier  of 
the  soil  has  certain  services  to  render,  of  which 
he  cannot  divest  himself,  and  which  he  must  stay 
on  certain  definite  fields  to  perform  when  wanted. 
In  consequence  the  races  of  men  which  were  pos- 
sessed of  an  organisation  easily  adapting  itself  to 
the  creation  of  such  a  militia,  have  had  a  striking 
tendency  to  prevail  in  the  struggle  of  history. 
"The  feudal  system,"  says  Sir  George  Campbell, 
on  many  accounts  one  of  our  most  competent 
judges,  "  I  believe  to  be  no  invention  of  the  Middle 
Ages,  but  the  almost  necessary  result  of  the  hereditary 
character  of  the  Indo-Germanic  institutions,  when 
the  tribes  take  the  position  of  dominant  conquerors. 
They  form,  in  fact,  an  hereditary  army,  with  that 
gradation  of  fealty  from  the  commander  to  the 
private  soldier  which  is  essential  in  military  opera- 
tions. Accordingly,  we  find  that  among  all  the 
tribes  of  Indo-Germanic  blood  which  have  conquered 
and  ruled  Indian  provinces,  the  tendency  is  to 
establish  a  feudal  system  extremely  similar  to  that 
which  prevailed  in  Europe.  In  Rajpootana  the 
system  is  still  in  full  force.  The  Mahrattas  and 
Sikhs  had  both  established  a    similar  system.      In 


The  Postulates  of  Political  Economy.  49 

my  early  days  it  existed  in  great  perfection  in  some 
parts  of  the  Cis-Sutlej  States."  ^  And  where  the 
system  is  most  developed,  at  the  lowest  point  of  the 
scale  there  is  always  an  immovable  class— serfs, 
villeins  regardants,  or  what  we  choose  to  call  them — 
who  do  not  fight  themselves,  who  perhaps  are  too 
abject  in  spirit,  or  perhaps  are  of  too  dubious  fidelity 
to  be  let  have  arms,  but  who  cultivate  the  ground 
for  those  who  really  fight.  The  soldier  class,  rooted 
to  the  land  by  martial  tenure,  has  beneath  it  a  non- 
soldier  class  even  more  rooted  to  the  soil  by  the 
tenure  of  tilling  it.  I  need  not  say  how  completely 
such  a  system  of  military  defence,  and  such  a 
system  of  cultivation,  are  opposed  to  the  free  transit 
of  labour  from  employment  to  employment.  Where 
these  systems  are  perfectly  developed,  this  transit  is 
not  so  much  impeded  as  prevented. 

And  there  is  a  yet  more  pervading  enemy  of  the 
free  circulation  of  labour.  This  is  slavery.  We 
must  remember  that  our  modern  notion  that  slavery 
is  an  exceptional  institution,  is  itself  an  exceptional 
idea ;  it  is  the  product  oi  recent  times  and  recent 
philosophies.  No  ancient  philosopher,  no  primitive 
community,  would  have  comprehended  what  we 
meant  by  it.  That  human  beings  are  divided  into 
strong  and  weak,  higher  and  lower,  or  what  is  thought 
to  be  such ;  and  that  the  weak  and  inferior  ought  to 
be  made  to  serve  the  higher  and  better,  whether 
they  would  wish  to  do  so  or  not,  are  settled  axioms 
oi   early   thought.     Whatever   might    be  the  origin 

'"Tenure  of  Land  in  India,"  chap.  iii.  of  Systejns  of  Land 
Tenure  in  Various  Cotuitries  (Cobden  Club  Essays). 

4 


50  Economic  Studies. 

and  whatever  might  be  the  fate  of  other  institutions^ 
the  ancient  world  did  not  doubt  that  slavery  at  all 
events  existed  "by  the  law  of  nature,"  and  would 
last  as  long  as  men.  And  it  interferes  with  the 
ready  passage  of  labour  from  employment  to  employ- 
ment in  two  ways.  First,  it  prevents  what  we  call 
for  this  purpose  "employments" — that  is,  markets 
where  labour  may  be  bought,  mostly  in  order  that  the 
produce  may  be  sold.  Slavery,  on  the  contrary, 
strengthens  and  extends  domestic  manufactures 
where  the  produce  is  never  sold  at  all,  where  it  is 
never  intended  to  be  so,  but  where  each  household 
by  its  own  hands  makes  what  it  wants.  In  a  slave- 
community  so  framed,  not  only  is  there  little  quick 
migration  of  free  labour,  but  there  are  few  fit  places 
for  it  to  migrate  between ;  there  are  no  centres  for 
the  purchase  of  much  of  it ;  society  tends  to  be 
divided  into  self-sufficing  groups,  buying  little  from 
the  exterior.  And  at  a  later  stage  of  industrial 
progress  slavery  arrests  the  movement  of  free  labour 
still  more  effectively  by  providing  a  substitute.  It  is, 
then,  the  slave  labour  which  changes  occupation, 
and  not  the  free  labour.  Just  as  in  the  present  day 
a  capitalist  who  wants  to  execute  any  sort  of  work 
hires  voluntary  labour  to  do  it,  so  in  a  former  stage 
of  progress  he  would  buy  slaves  in  order  to  do  it. 
He  might  not,  indeed,  be  able  to  buy  enough  slaves — 
enough  suitable  slaves,  that  is,  for  his  purpose.  The 
organisation  of  slavery  has  never  been  as  effectual  as 
our  present  classified  system  of  free  labour,  and  from 
intrinsic  defects  never  can  be.  But  it  does  develop 
earlier.     Just  when  the  system  of  free  labour  might 


The  Postulates  of  Political  Economy.  51 

develop  if  it  were  let  alone,  the  imperfect  substitute 
of  slavery  steps  in  and  spoils  it.  When  free  labour 
still  moves  slowly  and  irregularly,  and  when  frequent 
wars  supply  the  slave-market  with  many  prisoners, 
the  slave-market  is  much  the  easiest  resource  of  the 
capitalist.  So  it  is  when  a  good  slave-trade  keeps 
it  well  filled.  The  capitalist  finds  it  better  to  buy 
than  to  hire,  for  there  are  in  this  condition  of  things 
comparatively  many  men  to  be  bought  and  compara- 
tively fewtobehired.  And  the  result  takes  unexpected 
directions.  "  What  the  printing-press  is  in  modern 
times,"  says  a  German  writer,  "  that  slavery  was  in 
ancient  times."  And  though  this  may  be  a  little 
exaggerated,  it  is  certain  that  in  ancient  Rome  books 
were  produced  much  cheaper  and  in  much  greater 
number  than  they  were  for  hundreds  of  years  after- 
wards. When  there  was  a  demand  for  a  book, 
extra  copying-slaves  could  be  "  turned  on "  to 
multiply  it  in  a  way  which  in  later  times,  when 
slavery  had  ceased,  was  impossible,  and  which  is 
only  surpassed  by  the  way  in  which  additional 
compositors  are  applied  to  works  in  demand  now. 
And  political  philosophers  proposed  to  obtain  re- 
venue from  this  source,  and  to  save  taxation. 
"Suppose,"  says  Xenophon,  "that  the  Athenian 
State  should  buy  twelve  hundred  slaves,  and  should 
let  them  out  to  work  in  the  mines  at  an  obolus  a 
head,  and  suppose  that  the  whole  amount  annually 
thus  received  should  be  employed  in  the  purchase 
of  new  slaves,  who  should  again  in  the  same  way 
yield  the  same  income,  and  so  on  successively ;  the 
State   would   then    by  these    means   in    five   or  six 


52  Economic  Studies. 

years  possess  six  thousand  slaves,"  which  would 
yield  a  large  income.  The  idea  of  a  compound 
interest  investment  in  men,  though  abhorrent  to  us, 
seemed  most  natural  to  Xenophon.  And  almost 
every  page  of  the  classics  proves  how  completely 
the  civilisation  then  existing  was  based  on  slavery 
in  one  or  other  of  its  forms — that  of  skilled  labour 
(the  father  of  Demosthenes  owned  thirty-three 
cutlers  and  twenty  coachmakers)  or  unskilled,  that 
might  either  be  worked  by  the  proprietor  or  let  out, 
as  he  liked.  Even  if  this  system  had  only  economic 
consequences,  it  must  have  prevented  the  beginning 
of  freely  moving  labour,  for  it  is  much  handier  than 
such  a  system  can  be  at  its  outset.  And  as  we 
know,  the  system  has  moral  effects  working  in  the 
same  way  even  more  powerful,  for  it  degrades 
labour  by  making  it  the  slave-mark,  and  makes  the 
free  labourer  —  whether  the  proUtaire  of  ancient 
cities,  or  the  "mean  white"  of  American  planta- 
tions— one  'of  the  least  respectable  and  the  least 
workmanlike  of  mankind. 

Happily  this  full-grown  form  of  slavery  is  exceed- 
ingly frail.  We  have  ourselves  seen  in  America 
how  completely  it  collapses  at  an  extrinsic  attack ; 
how  easy  it  is  to  destroy  it,  how  impossible  to  revive 
it.  And  much  of  the  weakness  of  ancient  civilisa- 
tion was  also  so  caused.  Any  system  which  makes 
the  mass  of  a  society  hate  the  constitution  of  that 
society,  must  be  in  unstable  equilibrium.  A  small 
touch  will  overthrow  it,  and  scarcely  any  human 
power  will  re-establish  it.  And  this  is  the  necessary 
effect  of  capitalistic  slavery,  for  it  prevents  all  other 


The  Postulates  of  Political  Economy.  53 


labourers,  makes  slaves  the  "many"  of  the  com- 
munity, and  fills  their  mind  with  grief  and  hatred. 
Capitalistic  slavery  is,  as  history  shows,  one  of  the 
easiest  things  to  efface,  as  domestic  slavery  is  one  of 
the  hardCvSt.  But  capitalistic  slavery  has  vitally 
injfluenced  most  of  the  greatest  civilisations ;  and 
as  domestic  slavery  has  influenced  nearly  all  of 
them,  the  entire  effect  of  the  two  has  been  pro- 
digious. 

We  see  then  that  there  are  at  least  four  conditions 
to  be  satisfied  before  this  axiom  of  our  English 
Political  Economy  is  true  within  a  nation.  Before 
labour  can  move  easily  and  as  it  pleases  from  em- 
ployment to  employment  there  must  be  such  em- 
ployments for  it  to  move  between  ; — there  must  be 
an  effectual  government  capable  of  maintaining 
peace  and  order  during  the  transition  and  not  re- 
quiring itself  to  be  supported  by  fixity  of  station  in 
society  as  so  many  governments  have  been  ; — the 
nation  must  be  capable  of  maintaining  its  inde- 
pendent existence  against  other  nations  without  a 
military  system  dependent  on  localised  and  immovable 
persons ;  and  there  must  be  no  competing  system 
of  involuntary  labour  limiting  the  number  of  employ- 
ments or  moving  between  them  more  perfectly  than 
contemporary  free  labour.  These  are  not  indeed 
all  the  conditions  needful  for  the  truth  of  the  axiom, 
but  the  others  can  be  explained  better  when  some 
other  matters  have  been  first  discussed. 


54 


II. 

THE  TRANSFERABILITY  OF  CAPITAL. 

In  my  last  paper  I  discussed  the  fundamental 
principle  of  English  Political  Economy,  that  within 
the  limits  of  a  nation  labour  migrates  from  employ- 
ment to  employment,  as  increased  remuneration 
attracts  or  decreased  remuneration  repels  it ;  and 
now  I  have  to  treat  the  corresponding  principle  as  to 
capital,  that  it  flows  or  tends  to  flow  to  trades  of 
which  the  profits  are  high,  that  it  leaves  or  tends  to 
leave  those  in  which  the  profits  are  low,  and  that  in 
consequence  there  is  a  tendency — a  tendency  limited 
and  contracted,  but  still  a  tendency — to  an  equality 
of  profits  through  commerce. 

First,  this  requires  such  a  development  of  the 
division  of  labour  as  to  create  what  we  call  "  trade," 
that  is  to  say,  a  set  of  persons  working  for  the  wants 
of  others,  and  providing  for  their  own  wants  by  the 
return-commodities  received  from  those  others.  But 
this  development  has  only  been  gradually  acquired 
by  the  human  race.  Captain  Cook  found  some 
Australian  tribes  to  whom  the  idea  of  traffic  seemed 
unknown.  They  received  what  was  given  them 
readily,  but  they  received  it  as  a  present  only ;  they 
seemed  to  have  no  notion  of  giving  anything  in  lieu 
of  it.     The  idea  of  barter — an  idea  usually  so  familiar 


The  Postulates  of  Political  Economy.  55 

to  the  lower  races  of  men — appeared  never  to  have 
dawned  on  these  very  low  ones.  But  among  races 
in  such  a  condition  there  is  no  change  of  trades  as 
capital  becomes  more  and  more  profitable  in  any 
one.  The  very  conception  comes  long  after.  Every 
one  works  for  himself  at  everything ;  and  he  always 
works  most  at  what  he  likes  most  for  the  time ;  as 
he  changes  his  desires,  so  far  as  he  can  he  changes 
his  labour.  Whenever  he  works  he  uses  the  few 
tools  he  has,  the  stone  implements,  the  charred  wood, 
the  thongs  of  hide,  and  other  such  things,  in  the  best 
way  he  can  ;  a  hundred  savages  are  doing  so  at  once, 
some  in  one  way,  some  in  another,  and  these  are 
no  doubt  "  shiftings  of  capital".  But  there  is  no 
computation  of  profit,  as  we  now  reckon  profit,  on 
such  shiftings.  Profit,  as  we  calculate,  means  that 
which  is  over  after  the  capital  is  replaced.  But  a 
savage  incapable  of  traffic  does  not  make  this 
calculation  as  to  his  flints  and  his  hides.  The  idea 
could  not  even  be  explained  to  him. 

Secondly,  this  comparison  requires  a  medium  in 
which  the  profits  can  be  calculated,  that  is,  a  money. 
Supposing  that  in  the  flax  trade  profits  are  5  per 
cent.,  and  that  side  by  side  in  the  cotton  trade  they 
are  15  per  cent.,  capital  will  now-a-days  immediately 
run  from  one  to  the  other.  And  it  does  so  because 
those  who  are  making  much,  try  to  get  more  capital, 
and  those  who  are  making  little — still  more  those 
who  are  losing — do  not  care  to  keep  as  much  as  they 
have.  But  if  there  is  no  money  to  compute  in, 
neither  will  know  what  they  are  making,  and  there- 
fore the  process  of  migration  wants  its  motive,  and 


56  Economic  Studies. 


will  not  begin.  The  first  sign  of  extra  profit  in  a 
trade — not  a  conclusive,  but  a  strongly  presumptive 
one — is  an  extra  high  price  in  the  article  that  trade 
makes  or  sells ;  but  this  test  fails  altogether  when 
there  is  no  "  money  "  to  sell  in.  And  the  debit  side 
of  the  account,  the  cost  of  production,  is  as  difficult 
to  calculate  when  there  is  no  common  measure 
between  its  items,  or  between  the  product,  and  any 
of  them.  Political  Economists  have  indeed  an  idea 
of  " exchangeable  value" — that  is,  of  the  number  of 
things  which  each  article  will  exchange  for — and 
they  sometimes  suppose  a  state  of  barter  in  which 
people  had  this  notion,  and  in  which  they  cal- 
culated the  profit  of  a  trade  by  deducting  the 
exchangeable  value  of  the  labour  and  commodi- 
ties used  in  its  production  from  the  value  of  the 
finished  work.  But  such  a  state  of  society  never 
existed  in  reality.  No  nation,  which  was  not  clever 
enough  to  invent  a  money,  was  ever  able  to  conceive 
so  thin  and  hard  an  idea  as  "exchangeable  value  ". 
Even  now  Mr.  Fawcett  justly  says  that  it  puzzles 
many  people,  and  sends  them  away  frightened  from 
books  on  Political  Economy.  In  fact  it  is  an  ideal 
which  those  used  to  money-prices  have  framed  to 
themselves.  They  see  that  the  price  of  anything, 
the  money  it  fetches,  is  equal  to  its  "  purchasing 
power  "  over  things,  and  by  steadily  attending  they 
come  to  be  able  to  think  of  this  "  purchasing  power  " 
separately,  and  to  call  and  reason  upon  it  as  ex- 
changeable value.  But  the  idea  is  very  treacherous 
even  to  skilled  minds,  and  even  now-a-days  not  the 
tenth  part  of  any  population  could  ever  take  it  in. 


The  Postulates  of  Political  Economy.  57 

As  for  the  nations  really  in  a  state  of  barter  ever 
comprehending  it,  no  one  can  imagine  it,  for  they 
are  mostly  unequal  to  easy  arithmetic,  and  some 
cannot  count  five.  A  most  acute  traveller  thus 
desciibes  the  actual  process  of  bargaining  among 
savage  nations  as  he  saw  it.  "  In  practice,"  Mr. 
Galton  tells  us  of  the  Damaras,  "  whatever  they 
may  possess  in  their  language,  they  certainly  use  no 
numeral  greater  than  three.  When  they  wish  to 
express  four  they  take  to  their  fingers,  which  are 
to  them  as  formidable  instruments  of  calculation  as 
a  sliding-rule  is  to  an  English  schoolboy.  They 
puzzle  very  much  after  five,  because  no  spare  hand 
remains  to  grasp  and  secure  the  fingers  that  are 
required  for  '  units '.  Yet  they  seldom  lose  oxen  : 
the  way  in  which  they  discover  the  loss  of  one  is  not 
by  the  number  of  the  herd  being  diminished,  but  by 
the  absence  of  a  face  which  they  know.  When 
bartering  is  going  on  each  sheep  must  be  paid  for 
separately.  Thus  suppose  two  sticks  of  tobacco  to 
be  the  rate  of  exchange  for  one  sheep,  it  would  sorely 
puzzle  a  Damara  to  take  two  sheep  and  give  him 
four  sticks.  I  have  done  so,  and  seen  a  man  first 
put  two  of  the  sticks  apart,  and  take  a  sight  over 
them  at  one  of  the  sheep  he  was  about  to  sell. 
Having  satisfied  himself  that  that  one  was  honestly 
paid  for,  and  finding  to  his  surprise  that  exactly  two 
sticks  remained  in  hand  to  settle  the  account  for  the 
other  sheep,  he  would  be  afflicted  with  doubts ;  the 
transaction  seemed  too  pat  to  be  correct,  and  he 
would  refer  back  to  the  first  couple  of  sticks,  and 
then  his  mind  got  hazy  and  confused,  and  wandered 


58  Economic  Studies. 


from  one  sheep  to  the  other,  and  he  broke  off  the 
transaction  until  two  sticks  were  put  into  his  hand 
and  one  sheep  driven  away,  and  then  the  other  two 
sticks  given  him,  and  the  second  sheep  driven  away."^ 
Such  a  deHneation  of  primitive  business  speaks  for 
itself,  and  it  is  waste  of  space  showing  further  that 
an  abstraction  like  "value  in  exchange"  is  utterly 
beyond  the  reach  of  the  real  bartering  peoples — that 
a  habit  of  using  money,  and  of  computing  in  it,  are 
necessary  preliminaries  to  comparisons  of  profits. 

Unquestionably  the  most  primitive  community  can 
see  if  a  pursuit  utterly  fails,  or  if  it  immensely 
succeeds.  The  earliest  men  must  have  been  eager 
in  making  flint  tools,  for  there  are  so  many  of  them, 
and  no  doubt  they  did  not  try  to  breed  cattle  where 
they  died.  But  there  was  in  those  days  no  adjusted 
comparison  between  one  thing  and  another;  all 
pursuits  which  anyhow  suited  went  on  then  as  they 
do  among  savages  now. 

Money,  too,  is  in  this  matter  essential,  or  all  but 
essential,  in  another  way.  It  is  a  form  in  which 
capital  is  held  in  suspense  without  loss.  The  transfer 
of  capital  from  employment  to  employment  is  a 
matter  requiring  consideration,  consideration  takes 
time,  and  the  capital  must  be  somewhere  during 
that  time.  But  most  articles  are  bought  at  a  risk ; 
they  lose  in  the  process,  and  become  second-hand ; 
an  ordinary  person  cannot  get  rid  of  them  without 
receiving  for  them  less — often  much  less — than  he 
gave.     But  money  is  never  "  second-hand  "  ;  it  will 

^  "  Travels  in  Tropical  South  Africa,  by  Francis  Galton, 
chap,  v.,  p.  113, 


The  Postulates  of  Political  Economy.  50 

always  fetch  itself,  and  it  loses  nothing  by  keeping. 
No  doubt  modern  civilisation  has  invented  some 
other  forms  of  property  which  are  almost  as  good  to 
hold  as  money.  Some  interest-bearing  securities, 
like  Exchequer  bills,  are  so,  and  pay  an  interest 
besides.  But  these  are  the  creatures  of  money,  so 
to  say,  and  based  upon  it ;  they  presuppose  it,  and 
would  not  be  possible  without  it.  A  community  of 
pure  barter,  even  if  it  could  reckon  and  compare 
profits,  would  not  be  able  to  move  capital  accurately 
from  one  trade  to  another,  for  it  possesses  no  com- 
modity which  could,  without  risk  of  loss  that  could 
not  be  calculated,  be  held  idle  during  the  com- 
putation. 

The  refined  means  by  which  the  movement  is 
rtow  effected  is  one  of  the  nicest  marvels  of  our 
commercial  civilisation.  The  three  principal  of 
them  are  as  follows:  — 

First, — There  is  the  whole  of  the  loan  fund  of  the 
country  lying  in  the  hands  of  bankers  and  bill- 
brokers,  which  moves  in  an  instant  towards  a  trade 
that  is  unusually  profitable,  if  only  that  trade  can 
produce  securities  which  come  within  banking  rules. 
Supposing  the  corn  trade  to  become  particularly 
good,  there  are  immediately  twice  the  usual  number 
©f  corn  bills  in  the  bill-brokers'  cases  ;  and  if  the 
iron  trade,  then  of  iron  bills.  You  could  almost  see 
the  change  of  capital,  if  you  could  look  into  the  bill 
cases  at  different  times.  But  what  you  could  not 
see  is  the  mental  skill  and  knowledge  which  have 
made  that  transfer,  and  without  which  it  could  not 
have  been  made  safely.     Probably  it  would  be  new 


6o  Economic  Studies. 


to  many  people  if  stated  plainly ;  but  a  very  great 
many  of  the  strongest  heads  in  England  spend  their 
minds  on  little  else  than  on  thinking  whether  other 
people  will  pay  their  debts.  The  life  of  Lombard 
Street  bill-brokers  is  almost  exclusively  so  spent. 
Mr.  Chapman,  one  of  the  partners  in  Overend, 
Gurney  and  Co.,  once  rather  amused  a  parliament- 
ary committee  by  speaking  with  unction  and  en- 
thusiasm of  "paper  of  the  very  finest  quality,"  by 
which  he  meant  paper  on  which  the  best  promises 
were  written.  Bills  of  exchange  are  only  undertak- 
ings to  pay  money,  and  the  most  likely  to  be  paid 
are,  in  the  market  phrase,  of  the  "finest  quality," 
and  the  less  likely  of  inferior  quality.  The  mind  of 
a  man  like  Mr.  Chapman,  if  it  could  be  looked  into, 
would  be  found  to  be  a  graduating  machine  marking 
in  an  instant  the  rises  and  falls  of  pecuniary  likeli- 
hood. Each  banker  in  his  own  neighbourhood  is 
the  same;  he  is  a  kind  of  "solvency-meter,"  and 
lives  by  estimating  rightly  the  "  responsibility  of 
parties,"  as  he  would  call  it.  And  the  only  reason 
why  the  London  bill-broker  has  to  do  it  on  a  greater 
scale  is  that,  being  in  the  great  centre,  he  receives 
the  surplus  savings  not  of  one  district  but  of  many, 
which  find  no  means  of  employment  there.  He  is 
thus  become  the  greatest  and  most  just  measurer  of 
moneyed  means  and  moneyed  probity  which  the 
world  has  ever  seen  ;  to  reduce  it  to  its  lowest 
terms,  he  knows  that  more  people  will  pay  more 
debts  than  any  one  who  now  is,  or  ever  before  was, 
in  the  world.  And  the  combined  aggregate  of  these 
persons  is  a  prepared  machine  ready  to  carry  capital 


The  Postulates  of  Political  Economy.  6i 

in  any  direction.  The  moment  any  set  of  traders 
want  capital,  the  best  of  them,  those  whose  promises 
are  well  known  to  be  good,  get  it  in  a  minute,  be- 
cause it  is  lying  ready  in  the  hands  of  those  who 
know,  and  who  live  by  knowing,  that  they  are  fit  to 
have  it. 

Secondly, — In  modern  England,  there  is  a  great 
speculative  fund  which  is  always  ready  to  go  into 
anything  which  promises  high  profits.  The  largest 
part  of  this  is  composed  of  the  savings  of  men  of 
business.  When,  as  in  1871,  the  profits  of  many 
trades  suddenly  become  much  greater  than  usual, 
the  Stock  Exchange  instantly  becomes  animated ; 
there  is  at  once  a  market  for  all  kinds  of  securities, 
so  long  as  they  promise  much,  either  by  great  in- 
terest or  by  rise  of  prices.  Men  of  business  who  are 
used  to  a  high  percentage  of  profit  in  their  own  trade 
despise  3  or  4  per  cent.,  and  think  that  they  ought 
to  have  much  more.  In  consequence  there  is  no 
money  so  often  lost  as  theirs ;  there  is  an  idea  that 
it  is  the  country  clergyman  and  the  ignorant  widow 
who  mostly  lose  by  bad  loans  and  bad  companies. 
And  no  doubt  they  often  do  lose.  But  I  believe  that 
it  is  oftener  still  men  of  business,  of  slight  education 
and  of  active  temperament,  who  have  made  money 
rapidly,  and  who  fancy  that  the  skill  and  know- 
ledge of  a  special  trade  which  have  enabled  them 
to  do  so,  will  also  enable  them  to  judge  of  risks, 
and  measure  contingencies  out  of  that  trade  ;  where- 
as, in  fact,  there  are  no  persons  more  incompetent, 
for  they  think  they  know  everything,  when  they 
really  know  almost  nothing  out  of  their  little  busi- 


h±  Economic  Studie^^ 

ness,  and  by  habit  and  nature  they  are  eager  to  be 
doing.  So  much  of  their  money  as  comes  to  London 
is  in  greater  jeopardy  almost  than  any  other  money. 
But  there  is  a  great  deal  which  never  comes  there, 
and  which  those  who  make  it  are  able  to  put  out 
in  pushing  their  own  trade  and  in  extending  allied 
trades.  The  very  defects  which  make  the  trader 
so  bad  a  judge  of  other  things  make  him  an  excellent 
judge  of  these,  and  he  is  ready  and  daring,  and 
most  quick  to  make  use  of  what  he  knows.  Each 
trade  in  modern  commerce  is  surrounded  by  sub- 
sidiary and  kindred  trades,  which  familiarise  the 
imagination  with  it,  and  make  its  state  known ;  as 
soon,  therefore,  as  the  conspicuous  dealers  in  that 
trade  are  known  to  be  doing  particularly  well,  the 
people  in  the  surrounding  trades  say,  "  Why  should 
not  we  do  as  well  too  ? "  and  they  embark  their 
capital  in  it — sometimes,  of  course,  wrongly,  but 
upon  the  whole  wisely  and  beneficially.  In  an  ani- 
mated business  world  like  ours,  these  inroads  into 
the  trades  with  largest  gains  by  the  nearest  parts 
of  the  speculative  fund  are  incessant,  and  are  a 
main  means  of  equalising  profits. 

Lastly, — There  is  the  obvious  tendency  of  young 
men  starting  in  business  to  go  into  the  best-paying 
business,  or  what  is  thought  to  be  so  at  that  time. 
This,  in  the  best  cases,  also  acts  mainly  on  the 
allied  and  analogous  trades.  Little  good,  for  the 
most  part,  comes  of  persons  who  have  been  brought 
up  on  one  side  of  the  business  world  going  quite  to 
the  other  side — of  farmers'  sons  going  to"  cotton- 
spinning,  or  of  lacemakers'  sons  going  into  shipping. 


The  Postulates  of  Political  Economy^  63 

Each  sort  of  trade  has  a  tradition  of  its  own,  which 
is  never  written,  probably  could  not  be  written, 
which  can  only  be  learned  in  fragments,  and  which 
is  best  taken  in  early  life,  before  the  mind  is  shaped 
and  the  ideas  fixed.  From  all  surrounding  trades 
there  is  an  incessant  movement  of  young  men  with 
new  money  into  very  profitable  trades,  which  steadily 
tends  to  reduce  that  profitableness  to  the  common 
average. 

I  am  more  careful  than  might  seem  necessary  to 
describe  the  entire  process  of  equalisation  at  length, 
because  it  is  only  by  so  doing  that  we  can  see  how 
complex  it  is,  and  how  much  development  in  society 
it  requires  ;  but  as  yet  the  description  is  not  complete, 
or  nearly  so.  We  have  only  got  as  far  as  the  influx 
of  money  into  new  trades,  but  this  is  but  a  small  part 
of  what  is  necessary.  Trades  do  not  live  by  money 
alone ;  money  by  itself  will  not  make  anything. 
What,  then,  do  we  mean  when  we  speak  of  "  capital" 
as  flowing  from  emplo}'ment  to  employment  ? 

Some  writers  speak  as  if  the  only  thing  which 
transfers  of  capital  effect  is  a  change  in  the  sort  of 
labour  that  is  set  in  motion  ;  and  no  doubt  this  is  so 
far  true,  that  all  new  employments  of  capital  do 
require  new  labour.  Human  labour  is  the  primitive 
moving  force,  and  you  must  have  more  of  it  if  you 
want  more  things  done  ;  but  the  description,  though 
true,  is  most  incomplete,  as  the  most  obvious  facts 
in  the  matter  prove.  When  new  capital  comes  into 
cotton-spinning,  this  means  not  only  that  new  money 
is  applied  to  paying  cotton  operatives,  but  also  that 
new   money   is    applied    to    buying    new    spinning 


64  Economic  Studies. 


machines ;  these  spinning  machines  are  made  by 
other  machines,  as  well  as  labour;  and  the  second 
lot  of  machines  again  by  a  third  set,  as  well  as  other 
labour.  In  the  present  state  of  the  world,  nothing 
is  made  by  brute  labour ;  everything  is  made  by  aids 
to  labour ;  and  when  capital  goes  from  trade  to  trade, 
it  settles  not  only  which  sort  of  labour  shall  be 
employed,  but  which  sort  of  existing  machines  shall 
be  first  used  up,  which  sort  of  new  ones  made,  and 
how  soon  those  new  ones  shall  be  worn  out,  not  only 
in  the  selected  trade,  but  in  an  endless  series  sub- 
sidiary to  it. 

To  understand  the  matter  fully,  we  must  have  a 
distinct  view  of  what  on  this  occasion  and  on  this 
matter  we  mean  by  "capital".  The  necessity  of 
a  science  like  Political  Economy  is  that  it  mus 
borrow  its  words  from  common  life,  and  therefore 
from  a  source  where  they  are  not  used  accurately, 
and  cannot  be  used  accurately.  When  we  come  to 
reason  strictly  on  the  subjects  to  which  they  relate 
we  must  always  look  somewhat  precisely  to  their 
meaning  and  the  worst  is  that  it  will  not  do,  if  you 
are  writing  for  the  mass  of  men,  even  of  educated 
men,  to  use  words  always  in  the  same  sense.  Com- 
mon words  are  so  few,  that  if  you  tie  them  down 
to  one  meaning  they  are  not  enough  for  your  pur- 
pose ;  they  do  their  'work  in  common  life  because 
they  are  in  a  state  of  incessant  slight  variation ; 
meaning  one  thing  in  one  discussion  and  another 
a  little  different  in  the  next.  If  we  were  really 
to  write  an  invariable  nomenclature  in  a  science 
where  we  have  so  much  to  say  of  so  many  things 


The  Postulates  of  Political  Economy.  65 

as  we  have  in  Political  Economy,  we  must  invent 
new  terms,  like  the  writers  on  other  sciences. 
Mr.  de  Morgan  said  (in  defence  of  some  fresh-coined 
substantive) :  "  Mathematics  must  not  want  words 
because  Cicero  did  not  know  the  differential  cal- 
culus ".  But  a  writer  on  Political  Economy  is  bound 
— not  perhaps  by  Cicero — but  by  his  readers.  He 
must  not  use  words  out  of  his  own  head,  which  they 
never  heard  of;  they  will  not  read  him  if  he  does. 
The  best  way,  as  we  cannot  do  this,  is  to  give  up 
uniform  uses — to  write  more  as  we  do  in  common 
life,  where  the  context  is  a  sort  of  unexpressed  "  in- 
terpretation clause,"  showing  in  what  sense  words 
are  used  ;  only,  as  in  Political  Economy  we  have 
more  difficult  things  to  speak  of  than  in  common 
conversation,  we  must  take  more  care,  give  more 
warning  of  any  change,  and  at  times  write  out  the 
"  interpretation  clause  "  for  that  page  or  discussion, 
least  there  should  be  any  mistake.  I  know  that 
this  is  difficult  and  delicate  work ;  and  all  I  have 
to  say  in  defence  of  it  is  that  in  practice  it  is  safer 
than  the  competing  plan  of  inflexible  definitions. 
Any  one  who  tries  to  express  varied  meanings  on 
complex  things  with  a  scanty  vocabulary  of  fastened 
senses,  will  find  that  his  style  grows  cumbrous  with- 
out being  accurate,  that  he  has  to  use  long  peri- 
phrases for  common  thoughts,  and  that  after  all 
he  does  not  come  out  right,  for  he  is  half  his  time 
falling  back  into  the  senses  which  fit  the  case  in 
hand  best,  and  these  are  sometimes  one,  sometimes 
another,  and  almost  always  different  from  his  "hard 
and  fast "   sense.      In   such   discussions  we  should 

5 


66  Economic  Studies. 


learn  to  vary  our  definitions  as  we  want,  just  as  we 
say,  "let  x,  y,  z  mean"  now  this,  and  now  that, 
in  different  problems ;  and  this,  though  they  do  not 
always  avow  it,  is  really  the  practice  of  the  clearest 
and  most  effective  writers. 

By  capital,  then,  in  this  discussion,  we  mean  an 
aggregate  of  two  unlike  sorts  of  artificial  commodities 
— co-operative  things  which  help  labour,  and  re- 
munerative things  which  pay  for  it.  The  two  have 
this  in  common,  that  they  are  the  produce  of  human 
labour,  but  they  diifer  in  almost  everything  else  if 
you  judge  of  them  by  the  visual  appearance.  Be- 
tween a  loaf  of  bread  and  a  steam-engine,  between  a 
gimlet  and  a  piece  of  bacon,  there  looks  as  if  there 
were  really  nothing  in  common,  except  that  man 
manufactured  both.  But,  though  the  contrast  of 
externalities  is  so  great,  the  two  have  a  most 
essential  common  property  which  is  that  which 
Political  Economy  fixes  upon;  the  possible  effect  of 
both  is  to  augment  human  wealth.  Labourers  work 
because  they  want  bread  ;  their  work  goes  farther  if 
they  have  good  tools ;  and  therefore  economists  have 
a  common  word  for  both  tools  and  bread.  They  are 
both  capital,  and  other  similar  things  are  so  too. 

And  here  we  come  across  another  of  the  inevitable 
verbal  difficulties  of  Political  Economy.  Taking  its 
words  from  common  life,  it  finds  that  at  times 
and  for  particular  discussions  it  must  twist  them 
in  a  way  which  common  people  would  never  think 
of.  The  obvious  resemblances  which  we  deal 
with  in  life  dictate  one  mode  of  grouping  objects  in 
the  mind,  and  one  mode  of  speaking  of  them  ;  the 


The  Postulates  of  Political  Economy.  67 

latent  but  more  powerful  resemblance  which  science 
finds  would  dictate  another  form  of  speech  and 
mental  grouping.  And  then  what  seems  a  per- 
verse use  of  language  must  be  made.  Thus,  for 
the  present  discussion,  the  acquired  skill  of  a 
labourer  is  capital,  though  no  one  in  common  life 
would  call  it  so.  It  is  a  productive  thing  made  by 
man,  as  much  as  any  tool ;  it  is,  in  fact,  an  im- 
material tool  which  the  labourer  uses  just  as  he  does 
a  material  one.  It  is  co-operative  capital  as  much 
as  anything  can  be.  And  then,  again,  the  most  un- 
likely-looking and  luxurious  articles  are  capital  if 
they  reward  and  stimulate  labour.  Artisans  like  the 
best  of  rabbits,  the  best  bits  of  meat,  green  peas,  and 
gin ;  they  work  to  get  these ;  they  would  stay  idle  if 
they  were  not  incited  by  these,  and  therefore  these 
are  "capital".  Political  Economy  (like  most  moral 
sciences)  requires  not  only  to  change  its  definitions 
as  it  moves  from  problem  to  problem,  but  also  for 
some  problems  to  use  definitions  which,  unless  we 
see  the  motive,  seem  most  strange ;  just  as  in  Acts 
of  Parliament  the  necessity  of  the  draftsman  makes 
a  very  technical  use  of  words  necessary  if  he  is  to  do 
his  work  neatly,  and  the  reader  will  easily  be  most 
mistaken  and  confused  if  he  does  not  heed  the 
dictionary  which  such  Acts  contain. 

Remembering  all  this,  we  see  at  once  that  it  is 
principally  remunerative  capital  which  is  transferable 
from  employment  to  employment.  Some  tools  and 
instruments  are,  no  doubt,  used  in  many  trades, 
especially  the  complex  ones  ;  knives,  hammers,  twine, 
and  nails  can  be  used,  are  used,  in  a  thousand.     The 


68  Economic  Studies. 


existing  stock  of  these  is  transferred  bodily  when 
capital  migrates  from  an  employment.  But,  in 
general,  as  I  have  said  before,  the  effect  of  the  migra- 
tion on  co-operative  capital  is  to  change  the  speed 
with  which  the  existing  machines  are  worked  out, 
and  the  nature  of  the  new  machines  which  are  made  ; 
the  "  live  skill "  of  an  artisan  being  treated  as  a 
machine.  On  remunerative  capital  the  effect  is 
simpler.  As  a  rule,  much  the  same  commodities 
reward  labour  in  different  trades,  and  if  one  trade 
declines  and  another  rises,  the  only  effect  is  to 
change  the  labourer  who  gets  these  commodities  ;  or, 
if  the  change  be  from  a  trade  which  employs  little 
skilled  labour  to  one  which  employs  much,  then  the 
costly  commodities  which  skilled  labour  wants  will 
be  in  demand,  more  of  them  will  be  made,  and  there 
will  be  an  increase  of  animation  in  all  the  ancillary 
trades  which  help  their  making. 

We  see  also  more  distinctly  than  before  what  we 
mean  by  an  "employment".  We  mean  a  group  of 
persons  with  fitting  tools  and  of  fitting  skill  paid  by 
the  things  they  like.  I  purposely  speak  of  "  tools  " 
to  include  all  machines,  even  the  greatest,  for  I  want 
to  fix  attention  on  the  fact  that  everything  depends 
on  the  effort  of  man,  on  the  primary  fruit  of  human 
labour.  Without  this  to  start  with,  all  else  is 
useless.  And  I  use  it  out  of  brevity  to  include  such 
things  as  coal  and  materials,  which  for  any  other 
purpose  no  one  would  call  so,  but  which  are  plainly 
the  same  for  what  we  have  now  to  do  with. 

And  "  employment  "  in  any  large  trade  implies  an 
"employer".     The  capitalist  is  the  motive  power  in 


The  Postulates  of  Political  Economy,  6g 


modern  production,  in  the  "great  commerce".  He 
settles  what  goods  shall  be  made,  and  what  not ; 
what  brought  to  market,  and  what  not.  He  is  the 
general  of  the  army ;  he  fixes  on  the  plan  of  opera- 
tions, organises  its  means,  and  superintends  its 
execution.  If  he  does  this  well,  the  business 
succeeds  and  continues  ;  if  he  does  it  ill,  the  business 
fails  and  ceases.  Everything  depends  on  the  correct- 
ness of  the  unseen  decisions,  on  the  secret  sagacity 
of  the  determining  mind.  And  I  am  careful  to  dwell 
on  this,  though  it  is  so  obvious,  and  though  no  man 
of  business  would  think  it  worth  mentioning,  because 
books  forget  it, — because  the  writers  of  books  are 
not  familiar  with  it.  They  are  taken  with  the  con- 
spicuousness  of  the  working  classes ;  they  hear  them 
say :  "  It  is  we  who  made  Birmingham,  we  who 
made  Manchester,"  but  you  might  as  well  say  that 
it  was  the  "compositors"  who  made  the  Times  news- 
paper. No  doubt  the  craftsmen  were  necessary  to 
both,  but  of  themselves  they  were  insufficient  to  either. 
The  printers  do  not  settle  what  is  to  be  printed ; 
the  writers  do  not  even  settle  what  is  to  be  written. 
It  is  the  editor  who  settles  everything.  He  creates 
the  Times  from  day  to  day ;  on  his  power  of  hitting 
the  public  fancy  its  prosperity  and  power  rest ; 
everything  depends  on  his  daily  bringing  to  the 
public  exactly  what  the  public  wants  to  buy;  the 
rest  of  Printing-House  Square — all  the  steam-presses, 
all  the  type,  all  the  staff,  clever  as  so  many  of  them 
are, — are  but  implements  which  he  moves.  In  the 
very  same  way  the  capitalist  edits  the  "  business"; 
it    is    he    who    settles   what    commodities   to    offer 


70  Economic  Studies. 

to  the  public ;  how  and  when  to  offer  them,  and  all 
the  rest  of  what  is  material.  This  monarchical 
structure  of  money  business  increases  as  society  goes 
on,  just  as  the  corresponding  structure  of  war  busi- 
ness does,  and  from  the  same  causes.  In  primitive 
times  a  battle  depends  as  much  on  the  prowess  of 
the  best  fighting  men,  of  some  Hector  or  some 
Achilles,  as  on  the  good  science  of  the  general.  But 
now-a-days  it  is  a  man  at  the  far  end  of  a  telegraph 
wire — a  Count  Moltke,  with  his  head  over  some 
papers, — who  sees  that  the  proper  persons  are  slain, 
and  who  secures  the  victory.  So  in  commerce.  The 
primitive  weavers  are  separate  men  with  looms 
apiece,  the  primitive  weapon-makers  separate  men 
with  flints  apiece  ;  there  is  no  organised  action,  no 
planning,  contriving,  or  foreseeing  in  either  trade, 
except  on  the  smallest  scale ;  but  now  the  whole  is 
an  affair  of  money  and  management ;  of  a  thinking 
man  in  a  dark  office,  computing  the  prices  of  guns 
or  worsteds.  No  doubt  in  some  simple  trades  these 
essential  calculations  can  be  verified  by  several 
persons — by  a  board  of  directors,  or  something  like 
it.  But  these  trades,  as  the  sagacity  of  Adam  Smith 
predicted,^  and  as  painful  experience  now  shows,  are 
very  few  ;  the  moment  there  comes  anything  difficult 
or  complicated,  the  Board  "  does  not  see  its  way," 
and  then,  except  it  is  protected  by  a  monopoly,  or 
something  akin  to  monopoly,  the  individual  capitalist 
beats  it  out  of  the  field.  But  the  details  of  this  are 
not  to   my  present    purpose.     The    sole  point    now 

'  The  Wealth  of  Nations,  book  v.,  chap,  i 


The  Postulates  of  Political  Economy.  71 

material  is  that  the  transference  of  capital  from 
employment  to  employment  involves  the  pre-existence 
of  employment,  and  this  pre-existence  involves  that 
of  "  employers  "  :  of  a  set  of  persons — one  or  many, 
though  usually  one — who  can  effect  the  transfer 
of  that  capital  from  employment  to  employment, 
and  can  manage  it  when  it  arrives  at  the  employ- 
ment to  which  it  is  taken. 

And  this  management  implies  knowledge.  In  all 
cases  successful  production  implies  the  power  of 
adapting  means  to  ends,  of  making  what  you  want 
as  you  want  it.  But  after  the  division  of  labour  has 
arisen,  it  implies  much  more  than  this :  it  then 
requires,  too,  that  the  producer  should  know  the 
wants  of  the  consumer,  a  man  whom  mostly  he  has 
never  seen,  whose  name  probably  he  does  not  know, 
very  likely  even  speaking  another  language,  living 
according  to  other  habits,  and  having  scarcely  any 
point  of  intimate  relation  to  the  producer,  except 
a  liking  for  what  he  produces.  And  if  a  person  who 
does  not  see  is  to  suit  another  who  is  not  seen,  he 
must  have  much  head-knowledge,  an  acquired  learn- 
ing in  strange  wants  as  well  as  of  the  mode  of 
making  things  to  meet  them.  A  person  possessing 
'that  knowledge  is  necessary  to  the  process  of  trans- 
ferring capital,  for  he  alone  can  use  it  when  the 
time  comes,  and  if  he  is  at  the  critical  instant  not 
to  be  found,  the  change  fails,  and  the  transfer  is  a 
loss  and  not  a  gain. 

This  description  of  the  process  by  which  capital  is 
transferred  and  of  what  we  mean  by  it,  may  seem 
long,  but   it  will  enable   us  to  be  much  shorter  in 


72  Economic  Studies. 

showing  the  conditions  which  that  transfer  implies. 
First,  it  presupposes  the  existence  of  transferable 
labour,  and  I  showed  before  how  rare  transferable 
labour  is  in  the  world,  and  how  very  peculiar  are  its 
prerequisites.  You  cannot  have  it  unless  you  have 
a  strong  government,  which  will  keep  peace  in  the 
delicate  line  on  which  people  are  moving.  You  must 
not  have  fixed  castes  in  inherited  occupations,  which 
at  first  are  ways  and  means  to  do  without  a  strong 
government,  but  which  often  last  on  after  it  begins ; 
you  must  not  have  a  local  army  which  roots  men  to 
fixed  spots  for  military  purposes,  and  therefore  very 
much  to  fixed  pursuits ;  and  you  must  not  have 
slavery,  for  this  is  an  imperfect  substitute  for  free 
transferable  labour,  which  effectually  prevents  the 
existence  of  it.  Complete  freedom  of  capital  pre- 
supposes complete  freedom  of  labour,  and  can  only 
be  attained  when  and  where  this  exists. 

No  doubt  capital  begins  to  move  much  before  the 
movement  of  labour  is  perfect.  The  first  great  start 
of  it  commences  with  a  very  unpopular  person,  who 
is  almost  always  spoken  evil  of  when  his  name  is 
mentioned,  but  in  whom  those  who  know  the  great 
things  of  which  he  has  been  the  forerunner  will 
always  take  a  great  interest.  It  is  the  money-lender 
in  a  primitive  community,  whose  capital  is  first 
transferred  readily  from  occupation  to  occupation. 
Suppose  a  new  crop,  say  cotton,  becomes  suddenly 
lucrative,  immediately  the  little  proprietors  throng 
to  the  money-lender's  to  obtain  funds  to  buy  cotton. 
A  new  trade  is  begun  by  his  help,  which  could  not 
have  been  begun  without  him.     If  cotton  ceases  to 


The  Postulates  of  Political  Economy.  73 


be  a  good  crop,  he  ceases  to  lend  to  grow  it,  his 
spare  capital  either  remains  idle  or  goes  to  some 
other  loan,  perhaps  to  help  some  other  crop  which 
has  taken  the  place  of  cotton  in  profitableness. 
There  is  no  more  useful  trade  in  early  civilisation, 
though  there  is  none  which  has  such  a  bad  name, 
and  not  unnaturally,  for  there  is  none  which  then 
produces  more  evil  as  well  as  good.  Securities  for 
loans,  such  as  we  have  them  in  developed  commerce, 
are  rarely  to  be  met  with  in  early  times  ;  the  land 
— the  best  security  as  we  think  it — is  then  mostly 
held  upon  conditions  which  prevent  its  being  made 
in  that  way  available  ;  there  is  little  moveable 
property  of  much  value,  and  peasants  who  work  the 
land  have  scarcely  any  of  that  little ;  the  only  thing 
they  can  really  pledge  is  their  labour — themselves. 
But  then  when  the  loan  is  not  paid,  "  realising  the 
security  "  is  only  possible  by  making  the  debtor  a 
slave,  and  as  this  is  very  painful,  the  creditor  who 
makes  much  use  of  it  is  hated.  Even  when  the 
land  can  be  pledged,  peasant  proprietors  never  think 
that  it  ought  really  to  be  taken  if  the  debt  for 
which  it  is  pledged  is  not  paid.  They  think  that 
the  land  is  still  theirs,  no  matter  how  much  has  been 
lent  them  upon  it,  or  how  much  they  have  neglected 
to  pay.  But  odious  as  the  "usurer"  thus  becomes, 
he  is  most  useful  really,  and  the  beginner  of  the 
movement  which  creates  the  "great  commerce". 

Another  condition  which  precedes  the  free  transfer 
of  labour — the  first  prerequisite  of  the  free  transfer 
of  capital — is  slavery,  and  within  its  limits  this  is 
free  enough ;  indeed,  more  free  than  anything  else 


74  Economic  Studies. 


similar,  for  you  have  not  to  consult  the  labourer  at 
all,  as  in  all  other  organisations  you  must.  The 
capitalist  buys  the  slave  and  sets  him  to  do,  not 
what  the  slave  likes,  but  what  he  himself  likes.  I 
can  imagine  that  a  theorist  would  say  beforehand 
that  this  was  the  best  way  of  getting  things  done, 
though  not  for  the  happiness  of  the  doer.  It  makes 
the  "  working  group "  into  an  army  where  the 
general  is  absolute,  and  desertion  penal.  But  so 
subtle  is  the  nature  of  things,  that  actual  trial  shows 
this  structure  of  society  not  to  be  industrially 
superior  to  all  others,  but  to  be  very  ineffectual 
indeed,  and  industrially  inferior  to  most  of  them. 
The  slave  will  not  work  except  he  is  made,  and 
therefore  he  does  little ;  he  is  none  the  better,  or 
little  the  better,  if  he  does  his  work  well  than  if  he 
does  it  ill,  and  therefore  he  rarely  cares  to  do  it  very 
well.  On  a  small  scale,  and  under  careful  super- 
vision, a  few  slaves  carefully  trained  may  be  made 
to  do  very  good  work,  but  on  any  large  scale  it  is 
impossible.  A  gang  of  slaves  can  do  nothing  but 
what  is  most  simple  and  easy,  and  most  capable  of 
being  looked  after.  The  Southern  States  of  America, 
for  some  years  before  their  rebellion,  were  engaged 
in  trying  on  the  greatest  scale  and  with  the  most 
ample  means  the  world  has  ever  seen  the  experiment 
how  far  slavery  would  go ;  and  the  result  is  easily 
stated ;  they  never  could  "  make  brute  force  go 
beyond  brute  work  ". 

Next,  in  order  that  capital  can  be  transferred, 
it  must  exist  and  be  at  the  disposal  of  persons 
who  wish  to  transfer  it.     This  is  especially  evident 


The  Postulates  of  Political  Economy.  75 

as  to  remunerative  capital,  which  we  have  seen 
to  be  the  most  transferable  of  all  capital.  But  the 
earliest  wages-paying  commodities — the  food  and 
the  necessaries  which  in  simple  communities  the 
labourer  desires — are  accumulated  by  persons  who 
want  them  for  their  own  use,  and  who  will  not  part 
with  them.  The  "untransferable"  labourer — the 
labourer  confined  to  a  single  occupation  in  a  primitive 
society — saves  certain  things  for  himself,  and  needs 
them  for  himself,  but  he  has  no  extra  stock.  He 
has  no  use,  indeed,  for  it.  In  a  society  where  there 
is  no  transferable  labour,  or  need  to  hire,  there  is 
no  motive,  or  almost  none,  for  an  accumulation 
of  wages-paying  capital  which  is  to  buy  labour. 
The  idea  of  it,  simple  as  it  seems  to  us,  is  one 
of  a  much  later  age,  like  that  in  which  labour 
seeking  to  be  hired  is  the  commonest  of  things, 
and  therefore  the  commodities  needed  for  hiring  it 
are  among  the  commonest  too.  The  means  of  buy- 
ing, and  the  thing  bought,  inevitably  in  such  a 
case  as  this  grow  together. 

As  to  the  other  kind  of  capital — that  which  aids 
labour,  the  co-operative  kind — the  scientific  study 
of  savage  tribes,  which  is  so  peculiar  a  feature  of 
the  present  world,  has  brought  out  its  scantiness — 
I  might  say  its  meanness — almost  more  distinctly 
than  it  has  brought  out  anything  else.  Sir  John 
Lubbock,  one  of  our  greatest  instructors  on  this 
matter,  tells  us  the  implements  of  the  Australians 
are  very  simple.  "  They  have  no  knowledge  of 
pottery,  and  carry  water  in  skins,  or  in  vessels  made 
of  bark.     They  are  quite  ignorant  of  warm  water, 


76  Rconomic  Studies. 

which  strikes  them  with  great  amazement."  Some 
of  them  carry  "a  small  bag  about  the  size  of  a 
moderate  cabbage  net,  which  is  made  by  laying 
threads,  loop  within  loop,  somewhat  in  the  manner 
of  knitting  used  by  our  ladies  to  make  purses.  This 
bag  the  man  carries  loose  upon  his  back  by  a  small 
string,  which  passes  over  his  head  ;  it  generally  con- 
tains a  lump  or  two  of  paint  and  resin,  some  fish- 
hooks and  lines,  a  shell  or  two  out  of  which  these 
hooks  are  made,  a  few  points  of  darts,  and  their 
usual  ornaments,  which  include  the  whole  worldly 
treasure  of  the  richest  man  among  them."  All 
travellers  say  that  rude  nations  have  no  stock  of  any- 
thing— no  materials  lying  ready  to  be  worked  up, 
no  idle  tools  waiting  to  be  used ;  the  whole  is  a 
"  hand-to-mouth "  world.  And  this  is  but  another 
way  of  saying  that  in  such  societies  there  is  no 
capital  of  this  kind  to  be  transferred.  We  said  just 
now  that  what  we  meant  by  transfer  in  such  a  case 
was  a  change  in  the  sort  of  stock — the  kind  of 
materials,  the  kind  of  machines,  the  kind  of  living 
things  to  be  used  fastest  and  worn  out  quickest. 
But  in  these  poverty-stricken  early  societies  there  is 
substantially  no  such  stock  at  all.  Every  petty  thing 
which  there  exists  is  already  being  used  for  all  its 
petty  purposes,  and  cannot  be  worked  more  quickly 
than  it  already  is,  or  be  worn  out  more  rapidly  than 
it  is  being  worn  out. 

Next,  this  capital  must  be  concentrated  in  "trades," 
else  it  cannot  be  transferred  from  trade  to  trade  for 
the  sake  of  profit,  and  it  must  be  worked  by  a  single 
capitalist,  or  little  group  of  capitalists,  as  the  case 


The  Postulates  of  Political  Economy.  yy 

may  be,  else  the  trade  will  not  yield  profit.  And 
this,  as  has  been  explained,  is  not  a  universal  feature 
of  all  times,  but  a  special  characteristic  of  somewhat 
advanced  eras.  And  there  must  be  the  knowledge 
capable  of  employing  that  capital — a  knowledge 
which  altogether  differs  in  different  trades.  Now-a- 
days  the  amount  of  the  difference  is  a  little  disguised 
from  us  because  we  see  people  with  "  capital "  in 
various  pursuits— that  is,  who  are  traders  in  each 
and  all  of  them.  But  such  persons  could  not  do 
this  unless  they  were  assisted  by  more  specialised 
persons.  The  same  principle  governs  political  ad- 
ministration. Sir  George  Lewis,  one  of  the  most 
capable  judges  of  it  in  our  time,  has  observed:  "  The 
permanent  officers  of  a  department  are  the  deposi- 
taries of  its  official  tradition  ;  they  are  generally 
referred  to  by  the  political  head  of  the  office  for  in- 
formation on  questions  of  official  practice,  and  know- 
ledge of  this  sort  acquired  in  one  department  would 
be  useless  in  another.  If,  for  example,  the  chief 
clerk  of  the  criminal  department  of  the  Home  Office 
were  to  be  transferred  to  the  Foreign  Office,  or  to 
the  Admiralty,  the  special  experience  which  he 
has  acquired  at  the  Home  Office,  and  which  is 
in  daily  requisition  for  the  guidance  of  the  Home 
Secretary,  would  be  utterly  valueless  to  the  Foreign 
Secretary,  or  to  the  First  Lord  of  the  Admiralty. 
.  .  .  Where  a  general  superintendence  is  required, 
and  assistance  can  be  obtained  from  subordinates, 
and  where  the  chief  qualifications  are  judgment, 
sagacity,  and  enlightened  political  opinions,  such  a 
change  of  offices   is  possible ;  but    as  you    descend 


78  Economic  Studies. 

lower  in  the  official  scale,  the  speciality  of  functions 
increases.  The  duties  must  be  performed  in  person, 
with  little  or  no  assistance,  and  there  is  consequently 
a  necessity  for  special  knowledge  and  experience. 
Hence  the  same  person  may  be  successively  at  the 
head  of  the  Home  Office,  the  Foreign  Office,  the 
Colonial  Office  -and  the  Admiralty ;  he  may  be 
successively  President  of  the  Board  of  Trade,  and 
Chancellor  of  the  Exchequer ;  but  to  transfer  an 
experienced  clerk  from  one  office  to  another  would 
be  like  transferring  a  skilful  naval  officer  to  the 
army,  or  appointing  a  military  engineer  officer 
to  command  a  ship  of  war."  And  just  so  in  mercan- 
tile business — there  are  certain  general  principles 
which  are  common  to  all  kinds  of  it,  and  a  person 
can  be  of  considerable  use  in  more  than  one  kind  if 
he  understands  these  principles,  and  has  the  proper 
sort  of  mind.  But  the  appearance  of  this  common 
element  is  in  commerce,  as  in  politics,  a  sign  of 
magnitude,  and  primitive  commerce  is  all  petty.  In 
early  tribes  there  is  nothing  but  the  special  man — 
the  clothier,  the  mason,  the  weapon-maker.  Each 
craft  tried  to  be,  and  very  much  was,  a  mystery 
except  to  those  who  carried  it  on.  The  knowledge 
required  for  each  was  possessed  by  few,  kept  secret 
by  those  few,  and  nothing  else  was  of  use  but  this 
monopolised  and  often  inherited  acquirement ;  there 
was  no  "  general  "  business  knowledge.  The  idea  of 
a  general  art  of  money-making  is  very  modern ; 
almost  everything  ancient  about  it  is  individual  and 
particular.  Distance  helped  much  in  this  kind  of 
speciality.     "To  the  great  fair  of  Stourbridge,"   in 


The  Postulates  of  Political  Economy.  79 

the  south  of  England,  there  came,  we  are  told, 
besides  foreign  products,  "  the  woolpacks,  which 
then  formed  the  riches  of  England,  and  were  the 
envy  of  outer  nations.  The  Cornish  tin-mine  sent 
its  produce,  stamped  with  the  sign  of  the  rich  earl 
who  bought  the  throne  of  the  German  empire,  or  of 
the  warlike  prince  who  had  won  his  spurs  at  Crecy, 
and  captured  the  French  king  at  Poitiers.  .  .  .  Thither 
came  also  salt  from  the  springs  of  Worcestershire,  as 
well  as  that  which  had  been  gathered  under  the 
summer  sun  from  the  salterns  of  the  eastern  coasts. 
Here,  too,  might  be  found  lead  from  the  mines  of 
Derbyshire,  and  iron,  either  raw  or  manufactured, 
from  the  Sussex  forges."^  In  an  age  when  loco- 
motion was  tedious  and  costly,  the  mere  distance  of 
the  separate  seats  of  industry  tended  to  make  separ- 
ate monopolies  of  them.  Other  difficulties  of  trans- 
ferring capital  were  aggravated  by  the  rarity  and  the 
localisation  of  the  knowledge  necessary  for  carrying 
it  on. 

Next,  as  we  have  seen,  for  the  attraction  of  capital 
from  trade  to  trade,  there  must  be  a  money  in  which 
to  calculate  such  profits,  and  a  good  money  too. 
Many  media  of  interchange  which  have  been  widely 
used  in  the  world,  and  which  are  quite  good  enough 
for  many  purposes,  are  quite  unfit  for  this.  Cattle, 
for  instance,  which  were  certainly  one  of  the  first- 
used  kinds  of  money,  and  which  have  been  said  to 
have  been  that  most  used,  because  what  we  call  the 
primitive  ages  lasted  so  long,  are  quite  inadequate. 

1  Thorold  Rogers, 


8o  Economic  Studies. 


They  are  good  enough  for  present  bargains,  but  not 
for  the  forward-  and  backward-looking  calculations 
of  profit  and  loss.  The  notation  is  not  distinct 
enough  for  accuracy.  One  cow  is  not  exactly  like 
another ;  a  price-list  saying  that  so  much  raw  cotton 
was  worth  twenty  cows,  and  so  much  cotton  worth 
thirty  cows,  would  not  tell  much  for  the  purpose  ;  you 
could  not  be  sure  what  cows  you  would  have  to  give 
or  you  would  get.  There  might  be  a  "  loss  by  ex- 
change "  which  would  annihilate  profit.  Until  you 
get  good  coined  money,  calculations  of  profit  and 
loss  that  could  guide  capital  are  impossible. 

Next,  there  must  be  the  means  of  shifting 
"  money,"  which  we  analysed — the  loan  fund,  the 
speculative  fund,  and  the  choice  of  employment  by 
young  capitalists,  or  some  of  them.  The  loan  fund 
on  a  small  scale  is,  as  we  have  seen,  a  very  early 
institution  ;  it  begins  in  the  primitive  village  almost 
as  soon  as  any  kind  of  trade  begins  at  all,  and  a 
perception  of  its  enormous  value  is  one  of  the 
earliest  pieces  of  true  economic  speculation.  "  In 
the  Athenian  laws,"  says  Demosthenes,  "  are  many 
well-devised  securities  for  the  protection  of  the 
creditor ;  for  commerce  proceeds  not  from  the 
borrowers,  but  from  the  lenders,  without  whom  no 
vessel,  no  navigator,  no  traveller  could  depart  from 
port."  Even  in  these  days  we  could  hardly  put  the 
value  of  discounts  and  trade  loans  higher.  But 
though  the  loan  fund  begins  so  early  in  civilisation, 
and  is  prized  so  soon,  it  grows  very  slowly ;  the  full 
development,  modern  banking  such  as  we  are  familiar 
with  in  England,  stops  where  the  English  language 


The  Postulates  of  Political  Economy.  8i 

ceases  to  be  spoken.  The  peculiarity  of  that  system 
is  that  it  utilises  all  the  petty  cash  of  private  persons 
down  nearly  to  the  end  of  the  middle  class.  This  is 
lodged  with  bankers  on  running  account,  and  though 
incessantly  changing  in  distribution,  the  quantity  is 
nearly  fixed  on  the  whole,  for  most  of  what  one 
person  pays  out  others  almost  directly  pay  in ;  and 
therefore  it  is  so  much  added  to  the  loan  fund  which 
bankers  have  to  use,  though,  as  credit  is  always 
precarious,  they  can,  of  course,  only  use  it  with 
caution.  Besides  this,  English  bankers  have  most 
of  the  permanent  savings  of  little  persons  deposited 
with  them,  and  so  have  an  unexampled  power  of 
ready  lending.  But  ages  of  diffused  confidence  are 
necessary  to  establish  such  a  system,  and  peculiar 
circumstances  in  the  banking  history  of  England, 
and  of  Scotland  still  more,  have  favoured  it.  Our 
insular  position  exempting  us  from  war,  and  enabling 
our  free  institutions  to  develop  both  quietly  and 
effectually,  is  at  the  very  root  of  it.  But  here  until 
within  a  hundred  years  there  was  no  such  concentra- 
tion of  minute  moneys,  no  such  increment  to  the  loan 
fund,  and  abroad  there  is  nothing  equal  to  it  now. 
Taking  history  as  a  whole,  it  is  a  rare  and  special 
phenomenon.  Mostly  the  loan  fund  of  a  country 
consists  of  such  parts  of  its  moneyed  savings  as  those 
who  have  saved  them  are  able  to  lend  for  themselves. 
As  countries  advance  banking  slowly  begins,  and 
some  persons  who  are  believed  to  have  much,  are 
intrusted  with  the  money  of  others,  and  become  a 
sort  of  middlemen  to  put  it  out ;  but  almost  every- 
where the  loan  fund   is  very  small  to  our  English 

6 


82  Economic  Studies. 


notions.  It  is  a  far  less  efficient  instrument  for 
conveying  capital  from  trade  to  trade  everywhere  else 
than  here  ;  in  very  many  countries  it  is  only  incipient ; 
in  some  it  can  hardly  be  said  to  exist  at  all. 

The  speculative  fund,  as  I  have  called  it,  has  also 
but  a  bounded  range  of  action.  The  number  of  per- 
sons who  have  large  moneyed  savings  who  are  willing 
to  invest  them  in  new  things  is  in  England  con- 
siderable, but  in  most  countries  it  is  small.  Such 
persons  fear  the  unknown  ;  they  have  a  good  deal  to 
lose,  and  they  do  not  wish  to  lose  it.  In  most  com- 
munities there  is  not  even  the  beginning  of  a  settled 
opinion  to  tell  them  which  undertaking  is  likely  to 
be  good,  and  which  bad.  In  the  industrial  history 
of  most  countries,  the  most  marked  feature  is  an 
extreme  monotony ;  enterprises  are  few ;  the  same 
things  continue  for  ages  to  be  done  in  the  same  way. 
The  data  which  should  guide  original  minds  are  few 
and  insufficient ;  there  was  not  such  a  thing  as  a 
"  price  list  "  in  any  ancient  community.  No  Athenian 
merchant  could,  by  looking  over  a  file  of  figures,  see 
which  commodities  were  much  lower  in  their  average 
price,  and  which  therefore  might  be  advantageously 
bought  with  money  that  he  could  not  employ  in  his 
usual  trade.  Even  for  so  simple  a  speculation  as 
this,  according  to  our  present  notions,  the  data  did 
not  exist,  and  for  more  complex  ones  the  knowledge 
was  either  altogether  wanting  or  confined  to  a  few 
persons,  none  of  whom  might  have  the  idle  capital. 
The  speculative  fund  does  not  become  a  force  of 
first-rate  magnitude  till  we  have  in  the  same  com- 
munity a  great  accumulation  of  spare  capital,  and  a 


The  Postulates  of  Political  Economy.  83 

wide  diffusion  of  sound  trade  knowledge, — and  then 
it  does. 

The  free  choice  by  young  men  of  the  mode  in 
which  they  will  invest  the  capital  which  they  pos- 
sess, is  also  in  the  early  times  of  trade  much  hindered 
and  cramped,  and  it  only  gains  anything  near  the 
effective  influence  which  it  now  has  with  us,  in  quite 
late  times.  For  a  long  period  of  industrial  history 
special  associations  called  "guilds"  prohibited  it; 
these  kept  each  trade  apart,  and  prevented  capital 
from  going  from  one  to  the  other.  They  even  kept 
the  trade  of  city  A  quite  apart  from  the  same  trade 
in  city  B ;  they  would  not  let  capital  or  labour  flow 
from  one  to  the  other.  These  restrictive  hedges 
grew  up  naturally,  and  there  was  no  great  move- 
ment to  throw  them  down.  They  strengthened 
what  was  already  strong,  and  that  which  was  weak 
made  no  protest.  The  general  ignorance  of  trade 
matters  in  such  communities  made  it  seem  quite 
reasonable  to  keep  each  trade  to  those  who  under- 
stood it  ;  other  people  going  into  it  would,  it  was 
imagined,  only  do  it  ill,  lose  their  money,  and  hurt 
those  who  did  it  well  by  a  pernicious  competition. 
We  now  know  that  this  is  a  great  error,  that  such 
guilds  did  far  more  harm  than  good,  that  only  ex- 
periment can  show  where  capital  will  answer  in 
trade,  that  it  is  from  the  outsider  that  the  best 
improvements  commonly  come.  But  these  things, 
which  are  now  commonplaces  after  experience,  were 
paradoxes  before  it.  The  first  deduction  of  the  un- 
instructed  mind  was  and  is  the  other  way.  Nor  is 
it   dispelled   by  mere   argument.     Civilisation   must 


§4  Economic  Studies. 


increase,  trade  ideas  must  grow  and  spread,  and  idle 
capital  waiting  to  change  must  accumulate.  Till 
these  things  have  happened,  the  free  choice  by  a 
young  man  how  he  will  invest  his  capital  is  not  the 
common  rule,  but  the  rare  exception ;  it  is  not  what 
mostly  happens,  though  it  may  be  resisted,  but  what 
happens  only  where  it  is  unusually  helped.  Even 
where  there  is  no  formal  guild,  the  circumstances 
which  have  elsewhere  created  so  many,  create  an 
informal  monopoly,  mostly  much  stronger  than  any 
force  which  strives  to  infringe  it. 

None,  therefore,  of  the  three  instruments  which 
now  convey  capital  from  employment  to  employment 
can  in  early  times  be  relied  on  for  doing  so,  even  when 
that  capital  exists,  and  when  some  labour  at  least  is 
available  to  be  employed  by  it ;  neither  the  loan 
fund,  nor  the  speculative  fund,  nor  the  free  choice 
of  a  trade  by  young  men,  is  then  a  commonly  pre- 
dominant power ;  nor  do  the  whole  three  taken 
together  commonly  come  to  much  in  comparison 
with  the  forces  opposed  to  them. 

And  even  if  their  intrinsic  strength  had  been  far 
greater  than  it  was,  it  would  often  have  been  suc- 
cessfully impeded  by  the  want  of  a  final  condition  to 
the  free  transfer  of  capital,  of  which  I  have  not 
spoken  yet.  This  is  a  political  condition.  We  have 
seen  that  for  the  free  transfer  of  labour  from  employ- 
ment to  employment  a  strong  government  is  neces- 
sary. The  rules  regulating  the  inheritance  of  trades 
and  the  fixed  separations  of  labour  were  really  con- 
trivances to  obtain  some  part  of  the  results  of  the 
division   of  labour,  when   for  want    of  an    effectual 


The  Postulates  of  Political  Economy.  85 

government,  punishing  quarrels  and  preserving  life, 
free  competition  and  movement  in  labour  were  im- 
possible. And  this  same  effectual  government  is 
equally  necessary,  as  need  not  be  explained,  for  the 
free  migration  of  money.  That  migration  needs 
peace  and  order  quite  as  obviously  as  the  migration 
of  labour ;  and  those  who  understand  the  delicacy 
of  the  process  will  need  no  proof  of  it.  But  though 
a  strong  government  is  required,  something  more  is 
wanted  too ;  for  the  movement  of  capital  we  need  a 
fair  government.  If  capital  is  to  be  tempted  from 
trade  to  trade  by  the  prospect  of  high  profits,  it  must 
be  allowed  to  keep  those  profits  when  they  have 
been  made.  But  the  primitive  notion  of  taxation  is 
that  when  a  government  sees  much  money  it  should 
take  some  of  it,  and  that  if  it  sees  more  money  it 
should  take  more  of  it.  Adam  Smith  laid  down,  as 
a  fundamental  canon,  that  taxes  ought  to  be  levied 
at  the  time  when,  and  in  the  manner  in  which,  it  is 
most  easy  for  the  tax-payer  to  pay  them.  But  the 
primitive  rule  is  to  take  them  when  and  how  it  is 
most  easy  to  find  and  seize  them.  Under  govern- 
ments with  that  rule  persons  who  are  doing  well 
shrink  from  showing  that  they  are  doing  well ;  those 
who  are  making  money  refuse  to  enjoy  themselves, 
and  will  show  none  of  the  natural  signs  of  that  money, 
lest  the  tax-gatherer  should  appear  and  should  take 
as  much  as  he  likes  of  it.  A  socialist  speaker  once 
spoke  of  a  "  Jiealthy  habit  of  confiscation,"  and  that 
habit  has  been  much  diffused  over  the  world.  Wher- 
ever it  exists  it  is  sure  exceedingly  to  impede  the  move- 
ments of  capital,  and  where  it  abounds  to  prevent  them. 


86  Economic  Studies. 

These  reasonings  give  us  a  conception  of  a  "  pre- 
economic"  era  when  the  fundamental  postulates  of 
Political  Economy,  of  which  we  have  spoken,  were 
not  realised,  and  show  us  that  the  beginnings  of  all 
wealth  were  made  in  that  era.  Primitive  capital 
accumulated  in  the  hands  of  men  who  could  neither 
move  it  nor  themselves— who  really  never  thought 
of  doing  either — to  whom  either  would  often  have 
seemed  monstrous  if  they  could  have  thought  of  it, 
and  in  whose  case  either  was  still  more  often  prevented 
by  insuperable  difficulties.  And  this  should  warn  us 
not  to  trust  the  historical  retrospect  of  economists, 
merely  because  we  see  and  know  that  their  reason- 
ings on  the  events  and  causes  of  the  present  world 
are  right.  Early  times  had  different  events  and 
different  causes.  Reasoners  like  economists,  and 
there  are  many  others  like  them,  are  apt  to  modify 
the  famous  saying  of  Plunket ;  they  turn  history 
not  into  an  old  almanac,  but  into  a  new  one.  They 
make  what  happens  now  to  have  happened  always, 
according  to  the  same  course  of  time. 

And  these  reasonings  also  enable  us  to  explain 
what  is  so  common  in  all  writing  concerning  those 
early  and  pre-economic  times.  One  of  the  common- 
est phenomena  of  primitive  trade  is  "fixed"  prices, 
and  the  natural  inquiry  of  every  one  who  is  trained 
in  our  Political  Economy  is,  how  could  these  prices 
be  maintained  ?  They  seem  impossible  according 
to  the  teaching  which  he  has  received,  and  yet  they 
were  maintained  for  ages ;  they  lasted  longer  than 
many  things  now-a-daj-s  which  we  do  not  reckon 
short-lived.     One  explanation  is  that  they  were  main- 


The  Postulates  of  Political  Economy.  87 

tained  by  custom  ;  but  this  fails  at  the  crisis,  for  the 
question  is,  how  could  the  custom  be  maintained  ? 
The  unchanging  price  could  not  always  be  right 
under  changing  circumstances.  Why  did  not  capital 
and  labour  flow  into  the  trades  which  at  the  time 
had  more  than  their  "natural"  price,  desert  those 
which  had  less,  and  so  disturb  the  first  with  a  plethora, 
and  the  second  with  a  scarcity  ?  The  answer  we 
now  see  is  that  what  we  have  been  used  to  call 
"  natural "  is  not  the  first  but  the  second  nature  of 
men  ;  that  there  were  ages  when  capital  and  labour 
could  not  migrate,  when  trade  was  very  much  one 
of  monopoly  against  monopoly.  And  in  such  a 
society,  fixing  a  price  is  a  primitive  way  of  doing 
what  in  after  ages  we  do  as  far  as  we  can ;  it  is  a 
mode  of  regulating  the  monopoly — of  preventing  the 
incessant  dissensions  which  in  all  ages  arise  about 
what  is  a  just  price  and  what  is  not,  when  there  is 
no  competition  to  settle  that  price.  The  way  in 
which  "  custom "  settles  prices,  how  it  gradually 
arrives  at  what  is  right  and  proper,  or  at  least  at 
what  is  endurable,  one  cannot  well  say ;  probably 
many  incipient  customary  prices  break  down  before 
the  one  which  suits  and  lasts  is  stumbled  upon. 
But  defects  of  this  rule-of-thumb  method  are  no  re- 
proach to  primitive  times.  When  we  try  to  regulate 
monopolies  ourselves  we  have  arrived  at  nothing 
better.  The  fares  of  railways — the  fixed  prices  at 
which  these  great  monopolies  carry  passengers — are 
as  accidental,  as  much  the  rough  results  of  incon- 
clusive experiments,  as  any  prices  can  be. 

And  this  long  analysis  proves  so  plainly,  that  it 


88  Economic  Studies. 


would  be  tedious  to  show  it  again,  that  the  free 
movement  of  capital  from  employment  to  employ- 
ment within  a  nation,  and  the  consequent  strong 
tendency  to  an  equality  of  profits  there,  are  ideals 
daily  becoming  truer  as  competition  increases  and 
capital  grows,  that  all  the  hindrances  are  gradually 
diminishing,  all  the  incentives  enhancing,  and  all 
the  instruments  becoming  keener,  quicker,  and  more 
powerful. 

But  it  is  most  important  to  observe  that  this 
ideal  of  English  Political  Economy  is  not,  like  most 
of  its  ideals,  an  ultimate  one.  In  fact  the  "  great 
commerce "  has  already  gone  beyond  it ;  we  can 
already  distinctly  foresee  a  time  when  that  commerce 
will  have  merged  it  in  something  larger.  English 
Political  Economy,  as  we  know,  says  that  capital 
fluctuates  from  trade  to  trade  within  a  nation,  and  it 
adds  that  capital  will  not  as  a  rule  migrate  beyond 
that  nation.  "Feelings,"  says  Ricardo,  "which  I 
should  be  sorry  to  see  weakened,  induced  most  men 
of  property  to  be  satisfied  with  a  low  rate  of  profits 
in  their  own  country,  rather  than  seek  a  more 
advantageous  employment  for  their  wealth  in  foreign 
nations."  But  these  feelings  are  being  weakened 
every  day.  A  class  of  cosmopolitan  capitalists  has 
grown  up  which  scarcely  feels  them  at  all.  When 
Ricardo  wrote,  trade  of  the  modern  magnitude  was 
new :  long  wars  had  separated  most  nations  from 
most  others,  and  especially  had  isolated  England  in 
habit  and  in  feeling.  Ricardo  framed,  and  others 
have  continued,  a  theory  of  foreign  trade  in  which 
each    nation    is   bounded    by  a   ring-fence,  through 


The  Postulates  of  Political  Economy.  8g 

which  capital  cannot  pass  in  or  out.  But  the 
present  state  of  things  is  far  less  simple,  and  much 
of  that  theory  must  be  remodelled.  The  truth  is 
that  the  three  great  instruments  for  transferring 
capital  within  a  nation,  whose  operation  we  have 
analysed,  have  begun  to  operate  on  the  largest  scale 
between  nations.  The  "  loan  fund/'  the  first  and 
most  powerful  of  these,  does  so  most  strikingly. 
Whenever  the  English  money  market  is  bare  of  cash 
it  can  at  once  obtain  it  by  raising  the  rate  of  interest. 
That  is  to  say,  it  can  borrow  money  to  the  extent 
of  millions  at  any  moment  to  meet  its  occasions : 
or  what  is  the  same  thing,  can  call  in  loans  of  its 
own.  Other  nations  can  do  so  too,  each  in  pro- 
portion to  its  credit  and  its  wealth — though  none  so 
quickly  as  England,  on  account  of  our  superiority 
in  these  things.  A  cosmopolitan  loan  fund  exists, 
which  runs  everywhere  as  it  is  wanted,  and  as  the 
rate  of  interest  tempts  it. 

A  new  commodity,  one  of  the  greatest  growths 
of  recent  times,  is  used  to  aid  these  operations. 
The  "  securities  "  of  all  well-known  countries,  their 
national  debts,  their  railway  shares,  and  so  on  (a 
kind  of  properties  peculiar  to  the  last  two  centuries, 
and  increasing  now  most  rapidly),  are  dealt  in 
through  Europe  on  every  Stock  Exchange.  If  the 
rate  of  interest  rises  in  any  one  country  the  price  of 
such  securities  falls ;  foreign  countries  come  in  and 
buy  them  ;  they  are  sent  abroad  and  their  purchase- 
money  comes  here.  Such  interest-bearing  documents 
are  a  sort  of  national  "  notes  of  hand  "  which  a  country 
puts  out  when  it  is  poor,  and  buys  back  when  it  is  rich. 


go  Economic  Studies. 


The  mode  in  which  the  indemnity  from  France  to 
Germany  was  paid  is  the  most  striking  instance  of 
this  which  ever  occurred  in  the  world.  The  sum 
of  ;^200,ooo,ooo  was  the  largest  ever  paid  by  one 
set  of  persons  to  another,  upon  a  single  contract, 
since  the  system  of  payments  began.  Without  a 
great  lending  apparatus  such  an  operation  could  not 
have  been  effected.  The  resources  of  one  nation,  as 
nations  now  are,  would  not  have  been  equal  to  it. 
In  fact  it  was  the  international  loan  fund  which  did 
the  business.  "  We  may  say,"  M.  Say  states  in  his 
official  report,  "  that  all  the  great  banking-houses 
of  Europe  have  concurred  in  this  operation,  and  it 
is  sufficient  to  show  the  extent  and  the  magnitude 
of  it  to  say  that  the  number  of  houses  which  signed 
or  concurred  in  the  arrangement  was  fifty-five,  and 
that  many  of  them  represented  syndicates  of  bankers, 
so  that  the  actual  number  concerned  was  far  more 
considerable."  "The  concentration,"  he  adds,  "of 
the  effects  of  all  the  banks  of  Europe  produced 
results  of  an  unhoped-for  magnitude.  All  other 
business  of  a  similar  nature  was  almost  suspended 
for  a  time,  while  the  capital  of  all  the  private  banks, 
and  of  all  their  friends,  co-operated  in  the  success  of 
the  French  loans,  and  in  the  transmission  of  the 
money  lent  from  country  to  country.  This  was  a 
new  fact  in  the  economic  history  of  Europe,  and  we 
should  attach  peculiar  importance  to  it."  The 
magnitude  of  it  as  a  single  transaction  was  indeed 
very  new ;  but  it  is  only  a  magnificent  instance  of 
what  incessantly  happens ;  and  the  commonness 
of  similar  small    transactions,   and    the   amount    of 


The  Postulates  of  Political  Economy.  91 

them  when  added  together,  are  even  more  remark- 
able and  even  more  important  than  the  size  of  this 
one ;  and  similar  operations  of  the  international 
"  loan  fund "  are  going  on  constantly,  though  on 
a  far  less  scale. 

We  must  not,  however,  fancy  that  this  puts  all 
countries  on  a  level,  as  far  as  capital  is  concerned, 
because  it  can  be  attracted  from  one  to  another. 
On  the  contrary,  there  will  always  tend  to  be  a  fixed 
difference  between  two  kinds  of  countries.  The  old 
country,  where  capital  accumulates,  will  always,  on 
an  average,  have  it  cheaper  than  the  new  country, 
which  has  saved  little,  and  can  employ  any  quantity. 
The  Americans  in  the  Mississippi  Valley  are  naturally 
a  borrowing  community,  and  the  English  at  home 
are  naturally  lenders.  And  the  rate  of  interest  in 
the  lending  country  will  of  course  be  less  than  that 
in  the  borrowing  country.  We  see  approaches — 
distant  approaches  even  yet,  but  still  distinct  ap- 
proaches— ^to  a  time  at  which  all  civilised  and  in- 
dustrial countries  will  be  able  to  obtain  a  propor- 
tionate share  of  the  international  loan  fund,  and  will 
differ  only  in  the  rate  they  have  to  pay  for  it. 

The  "speculative  fund"  is  also  becoming  common 
to  all  countries,  and  it  is  the  English  who  have 
taken  the  lead,  because  they  have  more  money,  more 
practical  adaptation  to  circumstances,  and  more  in- 
dustrial courage  than  other  nations.  Some  nations, 
no  doubt,  have  as  much  or  more  of  one  of  these 
singly,  but  none  have  as  much  of  the  efficiency  which 
is  the  combined  result  of  all  three.  The  way  in  which 
continental  railways  — the  early  ones  especially,  when 


9 2  Economic  Studies. 

the  idea  was  novel — were  made  by  English  con- 
tractors is  an  example  of  this.  When  Mr.  Brassey, 
the  greatest  of  them,  was  making  the  line  from  Turin 
to  Novara,  for  the  Italian  Government,  Count 
Cavour  sent  one  morning  for  his  agent,  and  said: 
"We  are  in  a  difficulty :  the  public  have  subscribed 
for  very  few  shares,  but  I  am  determined  to  carry 
out  the  line,  and  I  want  to  know  if  Mr.  Brassey  will 
take  half  the  deficiency  if  the  Italian  Government 
will  take  the  other  half".  Mr.  Brassey  did  so,  and 
thus  the  railway  was  made.  This  is  the  inter- 
national speculative  fund  in  action,  and  the  world 
is  filled  with  its  triumphs. 

So  large,  so  daring,  and  indeed  often  so  reckless 
is  this  speculative  fund,  that  some  persons  have 
imagined  that  there  was  nothing  which  would  seem 
absurd  to  it.  A  very  little  while  ago,  a  scheme — a 
fraudulent  scheme,  no  doubt — was  gravely  brought 
out,  for  a  ship  railway  over  the  Isthmus  of  Panama ; 
the  ships  were  to  be  lifted  upon  the  line  on  one  side, 
and  lifted  off  and  returned  to  the  ocean  on  the  other. 
But  even  the  "speculative  fund"  would  not  stand 
that,  and  the  scheme  collapsed.  Yet  the  caricature 
shows  the  reality;  we  may  use  it  to  remind  ourselves 
how  mobile  this  sort  of  money  is,  and  how  it  runs 
from  country  to  country  like  beads  of  quicksilver. 

Young  men  also  now  transfer  their  capital  from 
country  to  country  with  a  rapidity  formerly  unknown. 
In  Europe  perhaps  the  Germans  are  most  eminent 
in  so  doing.  Their  better  school  education,  their 
better-trained  habits  of  learning  modern  languages, 
and  their  readiness  to  bear  the  many  privations  of 


The  Postulates  of  Political  Economy.  93 

a  residence  among  foreigners,  have  gained  them  a 
prominence  certainly  over  the  EngHsh  and  the 
French,  perhaps  above  all  other  nations.  But  taking 
the  world  as  a  whole  the  English  have  a  vast  superi- 
ority. They  have  more  capital  to  transfer,  and  their 
language  is  the  language  of  the  great  commerce 
everywhere,  and  tends  to  become  so  more  and  more. 
More  transactions  of  the  "  cosmopolitan  speculative 
fund  "  are  arranged  in  English,  probably,  than  in  all 
the  other  languages  of  the  world  put  together ;  not 
only  because  of  the  wealth  and  influence  of  mere 
England,  though  that  is  not  small,  but  because  of 
the  wealth  and  influence  of  the  other  States  which 
speak  that  language  also,  the  United  States,  our 
colonies,  and  British  India,  which  uses  it  mostly  for 
its  largest  trade.  The  number  of  English  com- 
mercial houses  all  over  the  world  is  immense,  and 
of  American  very  many,  and  yearly  a  vast  number 
of  young  Englishmen  are  sent  out  to  join  them. 
The  pay  is  high,  the  prospect  good,  and  insular  as 
we  are  thought  to  be  (and  in  some  respects  we  are 
so  most  mischievously),  the  emigration  of  young 
men  with  English  capital,  and  to  manage  English 
capital,  is  one  of  the  great  instruments  of  world- 
wide trade  and  one  of  the  binding  forces  of  the 
future. 

In  this  way  the  same  instruments  which  diffused 
capital  through  a  nation  are  gradually  diffusing  it 
among  nations.  And  the  effect  of  this  will  be  in  the 
end  much  to  simplify  the  problems  of  international 
trade.  But  for  the  present,  as  is  commonly  the 
case  with  incipient  causes  whose  effect  is  incomplete, 


g4  Economic  Studies. 

it  complicates  all  it  touches.  We  still  have  to  con- 
sider, after  the  manner  Ricardo  began,  international 
trade  as  one  between  two  or  more  limits  which  do 
not  interchange  their  compound  capitals,  and  then 
to  consider  how  much  the  conclusions  so  drawn  are 
modified  by  new  circumstances  and  new  causes. 
And  as  even  when  conceived  in  Ricardo's  compara- 
tively simple  manner,  international  trade,  as  Mr. 
Mill  justly  said,  and  as  the  readers  of  his  discussion 
on  it  well  know,  is  an  excessively  difficult  subject 
of  inquiry,  we  may  expect  to  find  many  parts  of  it 
very  hard  indeed  to  reduce  to  anything  like  simplicity 
when  new  encumbrances  are  added.  The  popular 
discussion  of  the  subject  tends  to  conceal  its  diffi- 
culties, and  indeed  is  mostly  conducted  by  those 
who  do  not  see  them.  Nothing  is  commoner  than 
to  see  statements  on  it  put  forth  as  axioms  which  it 
would  take  half  a  book  really  to  prove  or  disprove 
But  with  the  soundness  or  unsoundness  of  such 
arguments  I  have  at  present  nothing  to  do.  The 
object  of  these  papers  is  not  to  examine  the  edifice 
of  our  English  Political  Economy,  but  to  define  its 
basis.  Nothing  but  unreality  can  come  of  it  till  we 
know  when  and  how  far  its  first  assertions  are  true 
in  matter  of  fact,  and  when  and  how  far  they  are 
not. 


95 


THE  PRELIMINARIES 


POLITICAL     ECONOMY.^ 

Adam  Smith  began  the  Wealth  of  Nations  about 
1773,  and  finished  it  in  1776 ;  and  as  our  modern 
Pohtical  Economy  really  begins  from  that  time,  we 
may  fairly  say  that  it  is  now  a  hundred  years  old.^ 
In  that  century,  especially  in  England,  its  career 
has  been  most  remarkable.  No  form  of  philoso- 
phical speculation  (some  theologies  excepted,  which 
are  not  comparable)  has  ever  had  half  or  a  thou- 
sandth part  of  the  influence  upon  life  and  practice  ; 
no  abstract  doctrine  was  ever  half  as  much  quoted 
or  half  as  much  acted  on.  The  whole  legislation 
of  England  as  to  trade  has  been  changed  by  the 
philosophy  of  trade,  and  the  life  of  almost  every  one 
in  England  is,  in  consequence,  different  and  better. 
Other  countries,  it  is  true,  have  not  equally  followed 

^  It  will  be  obvious  that  some  of  the  leading  ideas  of  the 
previous  essays  are  repeated  in  this.  There  is,  however,  so 
much  that  is  fresh  in  it,  and  so  much  danger  of  bungling  in 
any  attempt  to  disentangle  the  fresh  matter  from  what  was 
embodied  in  the  two  previous  essays,  that  it  has  been  thought 
better  to  run  some  little  risk  of  repetition  rather  than  to 
attempt  any  separation  of  the  old  and  new  by  any  other  hand 
than  the  author's. 

^  Written  in  1876  or  earlier. 


g6  Economic  Studies. 


this  teaching,  but  they  have  continually,  if  not 
equally,  discussed  it.  The  highest  class  of  culti- 
vated intellects  is  in  every  civilised  country  more 
or  less  affected  by  it.  When  a  little  while  ago  M. 
Thiers  began  to  talk  and  act  in  thorough  opposition 
to  the  whole  science,  a  shiver  of  wonder  ran  through 
Europe ;  it  seemed  an  anachronism  to  find  so  able  a 
mind  in  the  pre-economic  period,  and  a  strange 
survival  of  extinct  error,  to  hear  him  expounding 
the  good  of  all  which  Political  Economy  showed  to 
be  bad,  and  the  evil  of  all  which  Political  Economy 
proved  to  be  good.  No  kind  of  political  teaching 
has  ever  won  half  as  many  triumphs,  or  produced 
half  the  effects. 

But,  nevertheless,  the  reputation  of  Political 
Economy  is  not  altogether  satisfactory  to  the  minds 
of  those  who  most  value  and  prize  it.  There  is  not 
quite  the  same  interest  felt  for  it,  or  quite  the  same 
confidence  reposed  in  it,  which  there  was  formerly. 
A  small  knot  of  persons  deny  its  value  ;  a  good  man)' 
people,  though  sure  they  are  wrong,  are  puzzled  by 
them,  and  do  not  see  how  to  answer  them.  Man\ 
young  men,  even  studious  men,  especially  those 
educated  abroad,  have  not  studied  its  best  writers, 
and  have  but  vague  views  about  it.  Though  vic- 
torious, it  wants  part  of  the  prestige  of  victory ; 
though  rich  in  results,  its  credit  is  not  quite  as  good 
as  on  that  account  it  ought  to  be. 

The  truth  is  that  the  story  of  Political  Economy, 
if  I  may  so  call  it,  is  a  curious  one  in  itself;  the 
science  is  to  some  extent  a  new  sort  of  one  in  the 
world,  and  has  come  to  be  what  it  is  in   a  rather 


The  Preliminaries  of  Political  Economy.        97 


strange  way.  That  story  could  only  be  fully  ex- 
plained by  an  exposition  of  all  the  science,  and  an 
account  of  all  who  contributed  to  it.  But  I  think 
the  main  and  most  valuable  part  of  the  truth  may 
be  set  before  those  who  will  read  a  short  description 
of  the  science  as  it  now  stands,  and  a  rough  account 
of  the  labours  of  four  great  men,  ^  who  more  than 
any  others,  have  made  the  science  what  it  is,  and 
placed  it  where  it  is.  The  knowledge  so  given  will 
after  all  be  most  imperfect. 

Political  Economy  in  its  complete  form,  and  as  we 
now  have  it,  is  an  abstract  science,  just  as  statics 
or  dynamics  are  deductive  sciences.  And,  in  con- 
sequence, it  deals  with  an  unreal  and  imaginary 
subject.  Just  as  statics  and  dynamics — the  sciences 
of  theoretical  mechanics — deal  with  perfectly  rigid 
bodies,  which  nothing  will  bend  or  strain ;  with 
perfectly  elastic  planes,  from  which  the  rebound  is 
equal  to  the  impact  ;  with  a  world  destitute  of 
friction ;  with  physical  materials  in  short  which  no 
one  ever  expects  to  find  in  reality — so  Political 
Economy  deals  with  an  immaterial  subject,  which  in 
the  existing  world  cannot  be  found  either.  Political 
Economy  deals  not  with  the  entire  real  man  as  we 
know  him  in  fact,  but  with  a  simpler,  imaginary 
man — a  man  answering  to  a  pure  definition  from 
which  all  impairing  and  conflicting  elements  have 
been  fined  away.  The  abstract  man  of  this  science 
is  engrossed  with  one  desire  only — the  desire  of 
possessing  wealth,  not  of  course  that  there  ever  was  a 

'The  essay  on  J.  S.  Mill  was  not  written  and  that  on  Adam 
Smith  is  incomplete. 

7 


g8  Economic  Studies. 


being  who  always  acted  as  that  desire  would  dictate, 
any  more  than  any  one  thinks  there  is  in  nature 
a  world  without  friction  or  entirely  elastic  planes, 
but  because  it  is  found  convenient  to  isolate  the 
effects  of  this  force  from  all  others.  The  effect  of 
the  abstract  hypothesis,  made  on  the  necessary  basis 
of  statics  and  dynamics,  is  to  enable  us  to  see  the 
effect  of  the  single  agent,  "  pressure,"  in  a  simple 
way  and  free  from  the  repressing  and  obscuring  con- 
ditions which  exist  in  actual  nature.  And  in  the 
same  way  the  use  of  the  primitive  assumptions  of 
Political  Economy  is  to  show  how  the  greatest  of  in- 
dustrial desires — the  desire  to  obtain  wealth — would 
operate,  if  we  consider  it  as  operating,  as  far  as  we 
possibly  can,  by  itself.  The  maxim  of  science  is 
simply  that  of  common-sense — simple  cases  first ; 
begin  with  seeing  how  the  main  force  acts  when 
there  is  as  little  as  possible  to  impede  it,  and  when 
you  thoroughly  comprehend  that,  add  to  it  in  suc- 
cession the  separate  effects  of  each  of  the  encumber- 
ing and  interfering  agencies. 

If  such  a  simplification  is  necessary  in  physical 
science  where  the  forces  are  obvious  and  few,  it  must 
much  more  be  necessary  in  dealing  with  the  science 
of  society,  where  the  forces  are,  in  comparison,  very 
various  and  difficult  to  perceive.  In  this  very  science 
of  Political  Economy,  the  first  writers  endeavoured 
to  deal  in  a  single  science  with  all  the  causes  which 
produced  or  impaired  wealth — which,  as  they  would 
have  said,  "made  nations  rich  or  poor".  And  this 
was  the  most  natural  way  of  beginning.  Almost  all 
science    seems   to  have  begun   similarly.      In   each 


The  Preliminaries  of  Political  Economy.        gg 

case  there  was  some  large  palpable  fact  to  be  ex- 
plained— some  great  pressing  problem  to  be  solved. 
And  so  here,  if  you  look  over  the  nations  of  the 
world,  you  see  at  once  that  one  of  the  greatest  con- 
trasts between  them  is  that  of  comparative  wealth, 
or  comparative  poverty ;  the  palpable  fact  at  the 
beginning  of  Political  Economy  is  that  the  Dutch 
are  rich,  and  others  (the  Tyrolese,  suppose),  poor — 
that  England  is  a  very  rich  country,  and  Ireland  a 
very  poor  country ;  how  then  was  this  difference  to 
be  accounted  for,  and  the  practical  problem — money 
being  an  admitted  good— to  be  solved,  how  far  can 
we  make  the  poor  nations  rich,  and  how  are  we  to 
begin  so  to  do  ?  But  considered  in  this  simple  and 
practical  way,  the  science  of  Political  Economy  be- 
comes useless,  because  of  its  immense  extent.  The 
whole  of  a  man's  nature,  and  the  whole  of  his  cir- 
cumstances, must  be  reckoned  up  and  reasoned  upon 
before  you  can  explain  his  comparative  wealth  or 
poverty.  To  explain  the  difference  of  industrial 
conditions  between  the  Tyrol  and  Holland,  you  will 
have,  first,  to  state  all  the  points  of  difference  in 
religion,  in  morality,  and  in  inherited  character  be- 
tween a  Dutchman  and  a  Tyrolese — then  state  the 
diversities  of  their  physical  condition,  and  work  out, 
as  best  you  can,  the  effects  of  all  the  contrasts.  And 
still  further,  if  you  try  to  give  a  universal  reason  why 
nations  are  poor  and  why  nations  are  rich,  you  will 
not  be  able  to  arrive  at  any  useful  answer.  Some 
will  be  poor  because  they  have  a  bad  government  ; 
some  because  they  are  cooped  up  on  a  poor  soil  ; 
some  because  they  have  a  religion  which  disinclines 


lOO  Economic  Studies. 


them  to  make  money  ;  some  because  they  have 
ancient  rules,  which  helped  them  to  make  a  begin- 
ning, but  now  retard  them  ;  some  because  they  have 
never  been  able  to  make  that  beginning ;  and  many 
other  causes  might  be  given.  The  problem  taken  up 
in  that  form  is  indeterminate ;  why  nations  are  rich 
or  poor  depends  on  the  whole  intrinsic  nature,  and 
all  the  outward  circumstances,  of  such  nations. 
There  is  no  simpler  formula  to  be  discovered,  and  a 
science  which  attempted  to  find  one  would  of  neces- 
sity have  to  deal  with  the  whole  of  physical  science ; 
it  would  be  an  account  of  all  "  men  "  and  all  the 
earth. 

It  is  on  account  of  its  abstract  character  that 
Political  Economy  is  often,  and  justly  described,  as 
a  science  of  "  tendencies  "  only  ;  that  is,  the  object 
of  it  is  to  work  out  and  ascertain  the  result  of  certain 
great  forces,  as  if  these  alone  operated,  and  as  if 
nothing  else  had  any  effect  in  the  matter.  But  as 
in  matter  of  fact  many  other  forces  have  an  effect, 
the  computed  results  of  the  larger  isolated  forces 
will  never  exactly  happen  ;  they  will  only,  as  it  is 
said,  tend  more  or  less  to  happen  ;  that  is,  they 
happen  more  and  more  nearly  in  proportion  as  the 
resisting  and  perturbing  causes  in  each  case  happen 
to  be  less  and  less. 

The  very  refined  nature  of  the  modern  science  of 
Political  Economy  has  naturally  led  to  many  mis- 
takes about  it.  The  mere  idea  of  such  a  science  has 
evidently  never  crossed  the  minds  of  many  able 
writers,  and  persons  who  have  given  but  slight  con- 
sideration to  the  matter  are  much  puzzled.     Analo- 


The  Preliminaries  of  Political  Economy.       loi 

gous  sciences  of  physical  subjects  are,  as  has  been 
said,  easy  to  find,  but  illustrations  from  them  do  not 
tell  much  where  effectual  description  of  Political 
Economy  is  most  wanted.  A  science  occupied  with 
human  things,  and  professedly  with  a  part  of  human 
things  profoundly  interesting,  awakens  a  great  curi- 
osity among  multitudes  of  little  cultivation.  They 
begin  to  think  about  it,  and  to  read  about  it,  and  the 
better  the  books  they  read,  the  more  likely  are  they 
to  be  puzzled  by  what  they  find.  They  know  that 
they  are  reading  words  which  are  constantly  used  in 
common  life,  and  about  things  resembling,  at  least, 
those  of  that  life,  but  nevertheless  the  reasonings 
and  the  conclusions  do  not  seem  to  belong  to  real 
life  at  all.  Such  persons  know  nothing  about  statics 
or  dynamics  ;  and  any  attempt  to  explain  the  nature 
of  Political  Economy  by  an  account  of  the  nature  oi 
statics  or  dynamics,  is  only  explaining  obscurum  per 
obscurius.  As  might  be  expected,  the  worst  offenders 
are  the  uncultured  moralists.  They  see  all  manner 
of  reasonings  framed,  and  of  conclusions  drawn, 
apparently  about  subjects  with  which  morality  itself 
is  concerned  deeply — about  (say)  industry  and  wealth, 
population  and  poverty,  and  they  never  dream  that 
there  is  anything  peculiar  about  these  conclusions. 
They  apply  the  "  rules  of  morality"  to  them  at  once; 
they  ask:  "Is  argument  B  true  of  good  persons  ? 
Would  not  conclusion  C  augment  wickedness  ? " 
whereas,  in  fact,  the  economic  writers  under  con- 
sideration did  not  mean  (and  rightly  did  not  mean) 
to  deal  with  ethics  at  all.  They  only  evolved  a 
hypothesis;  they  did  not  intend  that  their  arguments 


102  Economic  Studies. 


should  be  thought  to  be  taken  from  real  life,  or  that 
their  conclusions  should  be  roughly,  and  as  they 
stood,  applied  to  real  life.  They  considered  not  the 
whole  of  actual  human  nature,  but  only  a  part  of  it. 
They  dealt  not  with  man,  the  moral  being,  but  with 
man,  the  money-making  animal. 

Naturally,  too,  the  cultivators  of  the  abstract 
science  itself  (even  those  who  fully  understood  its 
peculiar  nature),  did  not  always  in  practice  remember 
the  remoteness  to  practice  of  that  nature.  On  the 
contrary,  they  rushed  forth  into  the  world  with  hasty 
recommendations  to  instant  action  ;  whereas  the 
very  justification  of  their  reasonings,  and  the  very 
ground  of  their  axioms,  was  the  necessity  of  beginning 
the  investigation  of  the  subject  in  a  simple  theory,  and 
far  away  from  the  complexities  of  practice  and  action. 
But  so  much  are  the  practical  impulses  of  man 
stronger  than  his  theoretical  tastes,  that  the  culti- 
vators of  an  abstract  science  are  always  in  great 
danger  of  forgetting  its  abstract  nature ;  they  rush 
and  act  on  it  at  once.  In  the  abstract  physical 
sciences  there  is  an  effectual  penalty.  A  person  who 
acted  on  abstract  dynamics  would  soon  break  his 
head,  but  in  mental  and  physical  sciences  unhappily 
there  are  no  instant  tests  of  failure.  Whatever 
happens,  a  man  can  always  argue  that  he  was  right ; 
and  thus  an  abstract  science  of  human  things  is  more 
delicate  to  handle,  and  more  likely  to  be  misused, 
than  a  similar  science  of  external  nature. 

A  sort  of  uncertaint}'  likewise  seems,  even  in  the 
better-informed  minds,  to  creep  over  the  subject.  If 
it  is  so  remote  from  practice,  they  say,  how  can  you 


The  Preliminaries  of  Political  Economy.       103 

test  it,  and  how  can  you  tell  that  it  is  true  ?  But  this 
is  exactly  so  also  in  the  corresponding  physical 
sciences.  One  of  the  shrewdest  observers  of  in- 
tellectual matters  of  the  generation,  the  late  Sir 
G.  C.  Lewis,  used  to  say :  "  My  experience  in  this 
office  "  (he  was  then  Secretary  of  State  for  War) 
"  has  convinced  me  that  when  you  come  to  practice, 
physics  are  just  as  uncertain  as  metaphysics.  The 
abstract  theory  of  physics  is  unquestionably  much 
more  complete,  but  if  you  want  to  deal  with  an 
instance  in  life,  you  will  always  find  that  there  is  a 
*  tension,'  or  a  '  friction,'  or  some  other  cause,  which 
is  not  accurately  measured,  and  does  not  figure  in  the 
abstract  theory.  And  this  is  the  reason  why,  on  all 
such  questions,  scientific  evidence  is  so  conflicting. 
You  can  always  obtain  an  eminent  engineer  on  any  side 
to  set  against  an  eminent  engineer  on  the  other  side, 
because  the  scientific  and  certain  part  of  the  subject 
is  not  the  whole,  and  there  still  remains  an  im- 
perfectly explored  residuum  on  which  there  may  be 
different  opinions."  All  this  is  as  true  of  Political 
Economy  as  of  any  physical  science ;  its  deductions 
may  be  incontrovertible,  and  its  results  precisely  true, 
whenever  its  assumptions  are  true,  but  these  results 
will  be  very  imperfect  guides,  wherever  those 
assumptions  are  impaired  by  contradictory  matter. 

On  the  other  side,  however,  it  should  also  be  said 
that  "  abstract  "  Political  Economy  is  not  by  any 
means  the  unnatural  thing  which,  from  the  account 
of  it  on  paper,  and  the  description  of  its  difficulties, 
it  would  seem  to  be.  Many  people  on  the  matter 
have  "  talked  prose  all  their  lives  without  knowing 


104  Economic  Studies. 


it " ;  many  people  have  given  admirable  arguments 
on  Political  Economy,  and  have  been  more  or  less 
precisely  aware  of  the  difference  of  their  assumptions 
from  those  of  the  real  world,  though  they  have  never 
studied  the  specially  abstract  science,  and  could 
have  given  no  sufficient  delineation  of  it.  The  notion 
of  investigating  how  much  money  persons  would 
make,  who  simply  wished  to  make  it,  and  how  they 
would  best  do  so,  is  a  very  simple  idea.  The  desire 
for  wealth — using  wealth  in  the  largest  sense,  so  as 
to  include  not  only  the  means  of  luxury,  but  the 
means  of  subsistence — is  so  preponderant  in  very 
many  minds,  that  it  is  very  easy,  if  necessary, 
to  regard  it  as  the  sole  object.  As  far  as  people  are 
what  we  now  always  call  men  of  business,  monc*', 
the  thing  they  look  for  and  the  thing  they  want,  is 
their  sole  object,  and  in  that  sense  of  the  phrase. 
Political  Economy  may  be  fairly  called  the  science 
of  "  business  ". 

On  that  account,  in  some  very  large  scenes  of  our 
present  English  life.  Political  Economy  is  exactly 
true.  The  primary  assumption  on  which  it  rests 
is  precisely  realised.  On  the  Stock  Exchange  every- 
body does  act  from  a  love  of  money ;  men  come 
there  to  make  it,  and  thev  try  to  make  as  much  of  it 
as  they  can.  Of  Lombard  Street  the  same  may  be 
said ;  the  pecuniary  phenomena  of  Lombard  Street 
may  be  investigated  with  quite  sufficient  accuracy, 
on  the  assumption  that  bankers  come  there  only 
to  make  money,  and  when  there,  make  as  much  of  it 
as  they  can.  All  markets  are  scenes  nearly  similar ; 
so  long  as  they  are  at  the  market  all  dealers  try  to 


The  Preliminaries  of  Political  Economy.       105 

make  the  best  bargain  they  can.  As  the  principal 
nations  of  the  world  at  present  are  nations  of  business 
— commercial  nations — and  as  the  mass  of  men  in 
such  nations  are  mainly  occupied  in  business,  it 
follows  that  with  respect  to  those  nations  a  simple 
analysis  of  the  unchecked  consequences  of  the 
"  business  motive "  will  be  a  near  approximation 
to  a  large  part  of  their  life,  though  it  will  not  be  a 
perfect  account  of  their  complete  career,  for  there  is 
very  much  also  in  every  nation  besides  business 
and  besides  money — but  it  will  be  a  useful  hint  to  a 
predominant  characteristic  of  that  career.  Having 
investigated  the  effects  of  this  principal  motive,  we 
may  when  we  please,  and  as  far  as  it  is  necessary, 
investigate  the  effects  of  the  almost  infinite  number 
of  the  secondary  and  interfering  motives. 

As,  too,  it  is  at  present  necessary  for  all  nations 
to  be  rich  in  order  to  be  influential  in  the  world,  it 
follows  further,  that  an  account  of  the  commercial 
motive  of  action,  taken  by  itself,  is,  as  the  world  now 
stands,  an  analysis  of  the  results  of  a  principal 
ingredient  in  the  days  that  are  gone  by,  when  poor 
barbarians,  if  warlike,  were  more  powerful  than  rich 
civilised  people.  The  times  are  gone  by  when 
civilisation  enervated  energy,  or  when  wealth  im- 
peded valour.  At  present,  courage  without  money 
is  courage  without  guns ;  and  courage  without  guns 
is  useless.  Political  Economy  traces,  in  an  abstract 
way,  the  effects  of  the  desire  to  be  rich,  and  nations 
must  now-a-days  abound  in  that  passion  if  they  are 
to  have  much  power  or  much  respect  in  the  world. 

On  the  other  hand,  no  intellectual  attempt  can  be 


io6  Economic  Studies. 

more  absurd  than  the  attempt  to  apply  the  con- 
clusions of  our  Political  Economy  to  the  lives  of 
nations  at  a  non-commercial  stage  of  their  existence. 
A  great  military  nation,  based  on  slavery,  like  the 
Romans ;  a  nation  bound  by  fixed  customs  like  so 
many  Oriental  nations ;  tribes  in  a  state  of  barbar- 
ism,— are  not  guided  principally  by  the  commercial 
spirit.  The  money-getting  element  is  a  most  sub- 
ordinate one  in  their  minds ;  its  effects  are  very 
subordinate  ones  in  their  lives.  As  the  commercial 
element  is  all  but  necessary  to  considerable  com- 
binations of  men,  that  element  will  almost  always 
have  effects,  and  usually  important  effects,  in  the 
destiny  of  these  combinations.  But  only  in  com- 
munities where  the  commercial  element  is  the 
greatest  element,  will  these  effects  be  the  greatest. 
In  so  far  as  nations  are  occupied  in  "  buying  and 
selling,"  in  so  far  will  Political  Economy,  the  ex- 
clusive theory  of  men  buying  and  selling,  come  out 
right,  and  be  true  of  them. 

But  it  will  be  good  as  far  as  it  goes,  and,  though 
it  is  not  my  business  to  say  it,  I  think  it  will  be 
the  fault  of  the  writer  if  the  curious  interest  of  the 
facts  does  not  lead  many  readers  to  a  further  study 
of  the  subject. 

And,  though  what  has  been  explained  is  the 
principal  difference  between  the  hypothetical  science 
of  Political  Economy  and  the  real  world,  it  is  by 
no  means  the  only  difference.  Just  as  this  science 
takes  an  abstract  and  one-sided  view  of  man,  who 
is  one  of  its  subjects,  so  it  also  takes  an  abstract 
and    one-sided   view  of  wealth,   which  is    its  other 


The  Preliminaries  of  Political  Economy.       107 

subject.  Wealth  is  infinitely  various ;  as  the  wants 
of  human  nature  are  almost  innumerable,  so  the 
kinds  of  wealth  are  various.  Why  men  want  so 
many  things  is  a  great  subject  fit  for  inquiry. 
Which  of  them  it  would  be  wise  for  men  to  want 
more  of,  and  which  of  them  it  would  be  wise  to 
want  less  of — are  also  great  subjects  equally  fit. 
But  with  these  subjects  Political  Economy  does  not 
deal  at  all ;  it  leaves  the  first  to  the  metaphysician, 
who  has  to  explain,  if  he  can,  the  origin  and  the 
order  of  human  wants  ;  and  the  second  to  the  moral- 
ist, who  is  to  decide,  to  the  best  of  his  ability,  which 
of  these  tastes  are  to  be  encouraged,  and  when — 
which  to  be  discouraged,  and  when  The  only 
peculiarity  of  wealth  with  which  the  economist  is 
concerned  is  its  differentia  specifica — that  which  makes 
it  wealth.  To  do  so  it  must  gratify  some  want  of 
man,  or  it  would  not  be  desirable,  or  it  would  not 
be  wealth.  But  whence  that  want  comes,  whether 
from  a  low  part  of  man,  or  from  a  high,  is  to  the 
economist  immaterial ;  whether  it  is  a  desirable  want 
for  man  to  gratify  he  cares  as  little,  so  long  as  that 
gratification  does  not  hurt  man  as  a  wealth-produc- 
ing machine.  He  regards  a  pot  of  beer  and  a 
picture,  a  book  of  religion  and  a  pack  of  cards,  as 
all  equally  "  wealth,"  and  therefore,  for  his  purpose, 
equally  worthy  of  regard.  The  only  division  of 
wealth  in  his  mind  is,  if  I  may  use  the  words,  the 
division  between  sterile  and  not  sterile.  Some 
things  will  help  men  to  make  new  things ;  some 
things  will  induce  men  to  work  and  make  new 
things ;  both  these  classes  of  things  are  in  the  eyes 


lo8  Economic  Studies. 


of  the  economist  capital  or  reproductive.  On  the 
other  hand,  other  things  have  no  similar  reproduc- 
tive power ;  if  they  were  taken  out  of  the  world  all 
work  would  go  on  with  equal  efficiency,  and  as 
many  new  things  would  be  produced.  And  these 
last  are,  in  the  eyes  of  the  economist,  unproductive 
opulence,  just  as  the  first  were  productive  capital. 

Further,  Political  Economy  makes  not  only  these 
assumptions  as  to  the  nature  of  its  principal  force 
and  as  to  that  of  its  object,  it  also  makes  two  as  to 
the  physical  conditions  under  which  this  force  acts, 
and  in  which  this  object  is  supposed  to  exist.  For 
its  own  purposes  it  simplifies,  as  we  have  seen,  the 
nature  of  the  actors,  and  the  end  of  the  action ; 
we  have  now  to  see  that  it  simplifies  also  the  stage. 

Political  Economy  assumes  that  land  is  "limited 
in  quantity  and  variable  in  quality  ".  And,  taking 
the  whole  of  human  states,  this  assumption  has 
almost  always  been  true.  There  has  been,  in  almost 
all  countries,  a  difficulty  in  obtaining  land ;  there 
has  scarcely  ever  been  a  surplus  of  it.  Still,  though 
this  assumption  accurately  coincides  with  the  usual 
phenomena  of  most  countries,  it  does  not  agree  with 
all  the  phenomena  of  them  all.  On  the  contrary, 
in  all  "new"  countries,  as  they  are  called,  land  is 
exceedingly  plentiful.  There  is  practically  no  diffi- 
culty in  procuring  it ;  in  the  valley  of  the  Mississippi 
as  much  of  the  best  land  as  any  one  wants  can, 
without  serious  impediment,  be  obtained.  No  doubt 
such  land  is  farther  off  from  the  best  markets  than 
most  occupied  land  of  a  like  kind.  But  in  the 
present  state  of  the  arts  such  a  diff"erence  in  distance 


The  Preliminaries  of  Political  Economy.       109 

presents  no  serious  difficulty.  The  construction  even 
of  a  short  railway  will  open  up  an  entire  district, 
and  make  its  produce  as  available  in  the  market  as 
that  of  much  land  long  before  cultivated.  In  new 
countries  it  can  hardly  be  said  that  this  assumption 
of  Political  Economy  is  at  all  the  truth ;  it  is  rather 
the  opposite  of  the  truth.  And  accordingly  the 
doctrines  of  abstract  Political  Economy  must  not 
be  applied  to  such  countries  roughly,  and  without 
previous  re-examination.  One  of  the  primitive 
assumptions  not  being  true,  we  must  be  careful  to 
reinvestigate  and  see  whether  any  particular  deduc- 
tion which  we  wish  to  use,  is,  or  is  not,  impaired 
— is,  or  is  not,  in  consequence,  untrue. 

At  first  sight  it  would  seem  that  this  limitation  of 
abstract  Political  Economy  would  exclude  it  from 
much  of  the  real  world.  New  countries,  one  would 
imagine,  would  be  among  the  most  common  of 
countries;  the  human  race  has  always  been  wander- 
ing, and  must  have  been  always  reaching  new 
countries.  But,  in  truth,  this  limitation  scarcely 
makes  any  new  exclusion.  The  nature  of  the  "  man" 
who  first  occupied  new  countries  did  not  "  conform  " 
to  the  standard  of  economic  man ;  the  being  of 
reality  was  not  the  being  of  the  hypothesis.  The  first 
men,  all  researches  justify  us  in  assuming,  nearly 
approached  in  nature  to  the  present  savage  man. 
They  had  not  probably  as  many  curious  customs  or 
so  many  debasing  superstitions ;  they  had  not  so 
many  ingrained  vices.  But  they  had  as  little  in- 
tellectual development,  and  as  little  knowledge  of 
material  things;  they  were  ignorant  of  the  "calen- 


no  Economic  Studies. 

dar " ;  they  could  with  difficulty  count  more  than 
five;  they  could  just  make  a  few  weapons  of  war  ; 
they  could  just  construct  some  sort  of  shed  that 
would  serve  for  a  dwelling ;  but  they  could  not  make 
any  of  the  articles  which  we  now  call  "  wealth  " ; 
and  they  would  not  have  appreciated  such  things. 
The  desire,  so  strong  in  civilised  man,  for  wealth,  has 
been  excited  in  him  by  the  experience  of  ages,  and 
has  been  transmitted  to  him  by  inheritance.  If  you 
take  a  present  savage,  even  of  a  high  type,  he  will 
find  the  life  of  cities,  the  life  of  wealth,  par  excellence, 
scarcely  tolerable.  There  is  a  well-known  story  of  one 
savage,  who,  after  living  some  forty  or  fifty  years  in  a 
cultivated  world,  in  his  old  age  returned  to  die  as  a  bar- 
barian, saying  "  that  civilisation  was  so  much  trouble 
he  could  bear  it  no  longer  ".  The  first  occupiers  of 
most  countries  were  not  men  eager  for  complex 
wealth ;  they  cared  only  for  a  bare  subsistence — 
and  then  to  kill  and  eat  one  another. 

Many  ages,  indeed,  have  always  intervened  be- 
tween the  first  settlement  of  any  country,  and  the 
rise  of  a  strong  and  independent  mercantile  element, 
before  the  time  at  which  the  first  assumption  of 
Political  Economy  was  at  all  satisfied  in  it.  During 
that  time  such  countries  commenced  a  kind  of 
civilisation,  but  it  was  a  very  different  kind  of  civilisa- 
tion from  the  predominantly  commercial ;  it  was  in 
general  ruled  by  fixed  customs,  as  most  of  the  East 
is  now ;  it  did  not  allow  its  members  to  choose 
their  own  ends  and  fix  their  own  existence  for  them- 
selves ;  on  the  contrary,  it  chose  itself  those  ends 
and   prescribed   that    existence.      And    the    life    so 


The  Preliminaries  of  Political  Economy.      m 

selected  gave  but  little  scope  to  the  production  of 
wealth.  It  was  occupied  either  with  an  incessant 
military  service,  or,  in  peace,  with  an  equally  incessant 
but  semi-religious  ritual ;  the  labour  for,  and  the  ac- 
cumulation of,  the  means  of  physical  comfort  were 
very  secondary  aims  in  most  of  the  periods  described 
by  history,  as  they  still  are  in  by  far  the  greater  part 
of  the  present  world.  For  ages  after  their  first 
colonisation,  there  was  no  such  absorbing  and  self- 
selecting  life  of  trade  as  Political  Economy  assumes 
and  requires. 

Accordingly,  in  all  the  old  world — the  world  as 
known  to  the  "ancients" — the  land  has  long  been 
occupied,  and  more  or  less  usefully,  more  or  less 
fully,  by  ancient  and  ineradicable  races.  In  practice 
they  cannot  be  dispossessed.  In  all  that  large 
part  of  the  world,  therefore,  land  is  very  scarce ; 
no  new  comers  can,  in  fact,  obtain  much  of  it.  But 
of  late  there  have  been  immense  territories — "new 
worlds,"  to  use  the  usual  word — of  which  this  is  not 
true,  but  where  the  very  reverse  is  true.  Long 
voyages,  impossible  to  the  ancient  navigator,  have 
been  made  possible  by  modern  inventions  ;  and  these 
voyages  have  discovered  large  regions  inhabited  only 
by  men  who  fade  away  before  the  presence  of  civil- 
ised men.  In  these  distant  regions  man  seems  to 
have  been  a  protected,  and,  therefore,  a  feeble  animal ; 
he  had  not  to  submit  to  the  incessant  competition 
which  has  in  the  "old  world"  hardened  his  frame 
and  seasoned  his  mind.  The  diseases  which  the 
European  can  bear,  the  stimulants  in  which  he 
delights,  the  labour  for  which  he  lives,  are  so  many 


112  Economic  Studies. 


poisons  to  the  Australian  or  American  savage.  He 
dies  of  one  or  all  of  them  soon  after  the  coming  of 
the  European,  and  he  leaves  his  land  vacant.  He 
has  never  been  able  to  cultivate  the  land  which  he 
calls  his,  and  now  he  drops  away  from  it.  As  a 
singular  result  of  this  strange  history,  land  of  the 
best  quality  is  now  procurable  in  large  quantities 
and  with  great  ease  by  civilised  man.  There  are 
now  countries  not  only  called  "new,"  because  newly 
discovered,  but  new,  really,  because  the  land  in  them 
can  now  be  used,  but  has  never  been  used  before. 

As  a  matter  of  fact,  therefore,  the  primitive 
assumption  of  hypothetical  Political  Economy,  that 
land  is  always  limited  in  quantity,  as  well  as  variable 
in  quality,  coincides  well  enough  with  the  usual  facts 
of  the  world.  But  as  the  modern  exception  is  one  of 
great  present  importance  to  economic  nations,  as  a 
matter  of  convenience  it  has  become  desirable  (though 
I  do  not  think  the  desirability  has  been  usually 
recognised)  to  annex  to  Political  Economy  a  full 
discussion  of  the  nature  and  the  effects  of  that 
exception.  What  has  hitherto  been  the  rule,  and 
what  has  hitherto  been  the  deviation  from  it,  both 
become  clearer  when  considered  side  by  side. 

It  may  be  asked,  what  is  the  use  of  laying  down 
such  a  rule,  if  you  admit  it,  and  discuss  exceptions 
to  it  ?  Why  invent  a  hypothetical  hedge  when  you 
know  that  it  does  not  include  all  you  want,  and  that, 
therefore,  3-ou  will  be  unable  to  keep  within  it  ? 
The  answer  is,  that  the  rule  was  not  arbitrarily  in- 
vented by  inward  fancy,  but  suggested  by  outward 
facts  long  predominant,      The  nearest   way  to  the 


The  Preliminaries  of  Political  Economy.       113 

whole  truth  is  by  pursuing  the  clue  which  the  partial 
truth  first  gave. 

Political  Economy  also  assumes,  as  another 
axiomatic  fact  as  to  land,  that  land  throughout  the 
world  is  for  the  most  part  of  such  fertility  that  the 
labour  of  a  cultivator,  if  he  has  but  a  very  moderate 
degree  of  knowledge  and  skill,  will  produce  not  only 
a  subsistence  for  himself,  but  also  many  other 
persons.  This  is  so  true  that  it  perhaps  scarcely 
needs  to  be  said,  but  it  is  of  cardinal  importance. 
If  it  had  not  been  true,  the  truths  of  Political 
Economy  and  the  lives  of  men  would  have  been 
altogether  different  from  what  they  now  are.  And 
there  is  no  a  priori  reason — in'  physics,  at  least — 
why  the  whole  earth  should  not  be  as  a  bit  of  bleak 
moor,  where  agriculturists  have  nothing  over,  and 
can  but  just  raise  a  bare  subsistence  for  themselves. 
But  for  the  most  part  there  is  a  surplus,  and  this 
surplus  is,  of  course,  increased  day  by  day.  By  the 
continual  improvement  in  the  arts  of  agriculture 
more  is  produced,  and,  therefore,  there  is  more  over. 
In  old  countries  the  increasing  productiveness  retards 
the  need  of  a  resort  to  new  soils,  and  diminishes 
the  evil  of  it ;  and  in  new  countries  this  additional 
surplus  is  an  extra  fund  for  exportation,  and  a  new 
means  for  supplying  the  wants  of  those  who  have 
stayed  at  home  in  the  old  world. 

And,  lastly.  Political  Economy  declines  to  investi- 
gate all  the  causes  which  determine  the  rate  of 
increase  of  man,  and  assumes  an  avowedly  incom- 
plete and  approximate  formula  as  to  it.  From  the 
\erv  nature  of  the  case,  Political  Economy  must  do 

8 


ti4  Economic  Studies, 


this.  The  causes  which  regulate  the  increase  of 
mankind  are  little  less  than  all  the  causes  outward 
and  inward  which  determine  human  action.  Climate, 
social  customs,  political  government,  inherited  race- 
nature,  and  other  things  beside,  affect,  as  we  all 
know,  the  rate  at  which  population  grows.  Political 
Economy  would  have  to  discuss  half  physiology, 
half  the  science  of  government,  and  half  several 
other  sciences  too,  if  it  attempted  to  investigate  the 
real  laws  which  regulate  the  multiplication  of  man- 
kind ;  it  has  necessarily  to  make  an  assumption,  to 
assume  as  a  dictum  some  approximation  to  the 
complex  truth,  which  is  at  once  simple  enough  to  be 
manageable,  and  true  enough  to  be  useful.  Political 
Economy,  therefore,  assumes  that  in  any  particular 
society  the  power  of  parents  to  produce  children 
exceeds  the  power  to  provide  for  them  in  what  those 
parents  thinks  sufficient  comfort ;  whence  it  comes 
that  either  parents  must  not  produce  all  the  children 
that  they  can,  or  that,  if  they  do,  the  standard  of 
comfort  in  the  population  must  deteriorate,  and  if 
the  multiplication  continue,  and  the  deterioration 
augment,  that  the  population  must  die  off.  There 
is  no  difficulty  in  showing  that  this  assumption  em- 
bodies accurately  enough  the  ordinary  experience  of 
mankind  as  history  records  it,  and  as  present  facts 
evince  it.  An  immense  "reserve  power"  of  multipli- 
cation is  certainly  to  be  found  in  most  countries, 
which  is  kept  down  by  one  obstacle  or  other,  but 
which  is  ready  to  start  forward  when  that  obstacle 
is  removed.  No  two  countries  can  differ  more  in 
every  respect  important  for  this  purpose  than  Great 


The  Preliminaries  of  Political  Economy.       115 

Britain  and  British  India.  Yet  both  of  them  seem 
to  prove  the  same  result.  At  home,  the  people  of 
Great  Britain  increase  only  at  the  rate  of  loi  per 
cent,  per  annum,  and  double  in  fifty-eight  years;  but 
if  you  take  the  very  same  population  to  the  Colonies 
or  the  United  States,  it  is  believed  to  increase  at  a 
much  more  rapid  rate,  and  to  double  itself  more 
rapidly,  though  the  relative  increase  is  not  nearly  so 
great  as  is  sometimes  assumed  when  no  sufficient 
account  is  taken  of  the  continual  immigration  into 
those  countries.  The  lesson  of  Hindostan  is  still 
more  remarkable.  The  population  of  the  Peninsula 
is  ordinarily  supposed  not  to  have  augmented  since 
the  time  of  Alexander;  there  is  conclusive  evidence 
that  for  centuries  preceding  the  English  conquest  it 
augmented  very  slowly,  if  at  all.  But  now,  under 
the  influence  of  long  peace,  and  long  good  govern- 
ment, the  population  is  beginning  to  augment  very 
rapidly.  In  the  North-West  Provinces,  where  the 
data  are  the  best,  it  is  said  to  be  augmenting  almost 
as  rapidly  as  the  population  of  Great  Britain.  Here, 
as  before,  there  is  an  immense  acceleration  of  the 
rate  of  multiplication,  because  a  repressive  force  has, 
as  before,  been  withdrawn.  No  one  can  doubt  that 
the  same  experiment  would  have  a  like  result  in 
other  cases. 

It  may  be  said  that  out  of  Europe  there  is  very 
much  unoccupied  land,  and  that  even  if  Europe  pro- 
duced all  the  people  it  could,  those  people  might  be 
sent  thither.  But  emigration  on  such  a  scale, 
though  imaginable  in  speculation,  is  not  possible  in 
practice.     To  create  very  rapidly  new  colonies,  or  to 


ii6  Economic  Sttidl 


tes. 


extend  very  rapidly  old  ones,  requires  the  migration 
not  only  of  persons  but  of  capital.  You  must  send 
thither  the  means  of  subsistence  if  the  emigrants 
are  to  be  subsisted,  and  the  means  of  employment 
if  they  are  to  be  employed,  and  capital  will  not  go 
unless  you  pay  it.  It  must  have  its  regular  per- 
centage ;  and  as  yet  no  capital  employed  in  founding 
colonies — no  capital,  that  is,  of  a  founding  company, 
or  of  founders  as  such — has  ever  paid  a  farthing. 
The  capital  so  expended  has  been  a  great  benefit  to 
the  emigrants  and  to  the  colony,  but  it  has  never 
paid  a  dividend ;  on  the  contrary,  the  whole  capital 
has  commonly  been  lost.  There  are  no  means  by 
which  owners  at  home  can  be  sure  of  their  interest, 
nor  will  very  many  owners  of  capital  go  themselves 
to  the  colonies,  only  because  it  would  much  help  the 
poor  there  if  they  did  so.  Capital  must  be  propelled 
by  self-interest  ;  it  cannot  be  enticed  by  benevolence. 
The  sudden  foundation  of  a  colony  so  huge  as  to 
contain  all  the  possible  children — all  those  that  might 
be  in  excess  of  those  which  are — is  impossible  ;  the 
bare  idea  of  it  is  ridiculous. 

Nor,  if  such  a  colony  could  be  founded,  would  it 
attain  the  end  desired.  Cultivated  persons  in  Europe 
do  not  produce  all  the  children  they  might,  because 
they  know  that  if  they  did,  those  children  could  not 
lead  any  such  life  as  they  themselves  lead.  They 
wish  their  children  to  have  refined  habits,  and  to 
live  by  their  talents  and  their  mind  as  they  do  them- 
selves. But  in  a  colony  this  is  simply  impossible. 
Rude  plenty  and  rough  prosperity  are  common,  but 
a  nice  refinement  is  all  but  impossible.     The  life  of 


The  Preliminaries  of  Political  Economy.       117 

a  lady,  as  we  see  it  in  Europe,  is  in  colonies  im- 
possible. As  sufficient  servants  cannot  be  obtained, 
the  mother  of  the  family  has  in  person  to  see  to  the 
manual  slavery  of  the  housework  as  well  as  look 
after  her  children,  and  this  leaves  her  little  oppor- 
tunity for  refined  culture.  The  men  are  a  little 
better  off,  but  not  much.  The  demand  for  educated 
labour  in  the  colonies  is  exceedingly  small ;  the 
business  of  the  place  is  to  produce  corn  or  wool — 
food  or  raw  material  ;  neither  skilled  labour  nor 
cultured  labour  is  much  wanted  for  that.  Almost 
all  our  colonies  have  warned  our  artisans  not  to  come 
thither,  because  there  was  no  room ;  and  as  for  the 
legal  or  other  long-trained  and  costly  mental  labour 
of  the  old  world,  there  is  very  little  opportunity  for 
it.  Not  only,  therefore,  is  a  colony  impossible 
which  should  be  huge  enough  for  all  the  possible 
people  of  the  old  world,  but  such  a  colony,  even  if 
possible,  would  be  inadequate  ;  it  would  only  provide 
for  the  children  of  rude  people  in  the  manner  rude 
people  wish  ;  it  would  not  provide  for  those  of  re- 
fined people  in  the  least,  as  refined  people  wish. 

The  measured  use  of  the  multiplying  power  which 
is  now  practised  by  all  decent  people  in  the  existing 
society  of  the  old  world  is,  therefore,  more  or  less 
essential  to  the  continuance  of  such  a  society.  A 
use  of  the  power  without  measure  would  certainly 
overcrowd  such  societies  with  high  aims  that  could 
not  be  satisfied ;  and,  perhaps,  also  with  mouths 
which  could  not  be  fed. 

And  it  is  quite  consistent  with  this  to  believe  that 
such  restraint  has  not  at  all  been  uniformly  practised 


ii8  Economic  Studies. 


in  the  world,  that  it  has  been  rather  the  rare  excep- 
tion, not  the  common  rule.  Such  restraint  has  not 
been  practised  because  it  has  not  been  wanted.  We 
have  been  let  into  the  secret  of  the  matter  by  the 
experience  of  India.  The  number  of  the  people  in 
British  India,  as  we  have  seen,  was  stationary  for 
ages,  but  now  they  have  begun  to  augment  quickly. 
And  we  know  the  reason  why. 

And  it  is,  too,  quite  consistent  with  this  doctrine 
to  believe,  as  has  been  lately  urged  with  singular 
force,  that  we  have  as  yet  much  to  learn  as  to  the 
theory  of  population, — that  the  numbers  of  all  nations 
do  not  augment  alike  (even  under  seemingly  similar 
conditions), — that  there  is  the  same  difference  in 
different  families, — that  there  are  a  variety  of  "  laws," 
some  that  can  be  clearly  indicated,  others  that  can 
be  only  suspected,  which  diminish,  or  seem  to 
diminish,  the  multiplying  capacity  of  mankind. 

One  of  these  is  the  increase  of  intellectual  action. 
Physiologists  say,  on  a  priori  ground,  that  if  you  spend 
nervous  force  in  one  direction,  you  will  not  have  as 
much  to  spend  in  another.  The  ultimate  identity  of 
seemingly  different  forces  is  one  of  the  most  re- 
markable discoveries  of  recent  science,  and  there  is 
every  reason  to  think  that  it  applies  here.  An 
incessant  action  of  the  brain  often  seems  to  diminish 
the  multiplying  power.  It  can  hardly  be  an  accident 
that  Shakespeare,  Lord  Bacon,  Milton,  Newton, 
and  Locke — perhaps  our  five  greatest  Englishmen — 
had   only  six  children  between   them.^     Locke  and 

^  There  may  be  some  doubt  as  to  Newton  and  Shakespeare, 
but  this  is  the  number  as  far  as  it  can  be  authenticated. 


The  Preliminaries  of  Political  Economy.       iig 

Newton,  it  is  true,  did  not  marry,  but  it  is  not 
irrational  to  suspect  that  the  coolness  of  temperament 
which  kept  them  single  was  but  another  phase  of 
the  same  fundamental  fact.  But  the  doctrine  of 
abstract  physiology  must  be  applied  with  caution ; 
it  only  says  that  of  any  particular  total  of  nervous 
force,  what  is  expended  in  one  way  will  not  remain 
to  be  expended  in  another  ;  in  any  given  case,  to  use 
the  well-known  phrase,  "  what  is  gained  in  children 
will  be  lost  in  mind  " ;  but  all  cases  are  not  alike. 
The  nervous  power  of  A  may  be  fifty  times  that  of  C, 
and,  therefore,  he  may  do  five  times  more  brain-work 
than  C,  and  also  have  five  times  his  children.  And, 
in  fact,  Mr.  Galton  finds  that  English  judges — a 
strongly  intellectual  race  as  a  whole — have  as  many 
children  as  other  people.  And  there  are  some  other 
limiting  observations  which  might  be  made  on  the 
subject.  Still,  on  the  whole  there  seems  to  be  a 
tendency  in  the  absorbing  action  of  intellectual  power 
to  have  this  particular  effect,  and  abstract  science 
teaches  that  we  should  expect  it. 

The  same  remark,  with  some  limitations,  is  pro- 
bably also  applicable  to  women.  Hardly  any  one 
who  observes  can  doubt  that  women  of  much  mind 
and  fine  nerves,  as  a  rule,  seem  not  so  likely  to 
have  children,  or,  at  least,  not  to  have  so  many 
children  as  others.  Here,  too,  as  with  men,  the 
whole  vital  force  in  one  case  often  may  be,  and 
often  will  be,  different  from  that  force  in  another, 
and,  therefore,  particular  women  may  be  up  to  the 
average,  or  even  be  remarkable  in  both  ways.  But 
still,   on  the  whole,  the  existence  of  the  tendency 


120  Economic  Studies. 


seems  clear.  And  it  is  curiously  like  a  similar  force 
at  the  other  end  of  the  social  scale.  Mr.  Wallace, 
one  of  the  most  competent  of  living  observers,  says 
that  the  increase  of  the  population  in  savage  tribes 
is  much  retarded  by  the  exhausting  labour  of  their 
women.  And  it  will  be  a  curious  cycle  if,  as  is  likely 
in  the  latest  civilisation,  the  same  preventive  check 
should  again  become  a  powerful  one. 

Another  force  which  may  be  strongly  suspected, 
if  it  cannot  be  quite  proved,  is  the  tendency  of  dis- 
heartened races  and  of  dispirited  families  to  die  out 
and  disappear.  This  force  would  seem  to  be  much 
the  same  as  that  which  operates  on  all  wild  animals 
when  in  confinement.  The  richest  food  may  be  given 
to  such  animals,  the  greatest  care  taken  of  them, 
and  their  apparent  health  may  seem  to  be  as  good 
as  possible,  and  yet  they  will  not  breed.  Now  all 
such  animals  are  dispirited  for  want  of  the  excite- 
ment of  a  wild  life,  and  this  may  be  the  reason  of 
the  change  in  their  multiplying  power ;  at  any  rate, 
in  the  case  of  men,  close  observers  of  the  dying 
savage  races  seem  to  think  that  often  the  mind  has 
something  to  do  with  it.  The  New  Zealander  says 
that  "  as  the  English  rat  has  supplanted  the 
Maori  rat,  so  the  English  '  man '  will  supplant  the 
Maori  *  man '  ".  He  looks  on  the  extinction  of  his 
race  as  a  fixed  fate,  and,  in  consequence,  his  spirits 
fall,  his  mind  loses  some  of  its  tone,  and  his  con- 
stitution some  of  its  vigour.  In  civilised  life  parti- 
cular families  sometimes  seem  to  droop  and  die 
away,  though  it  is  not  possible  to  set  down  the 
cases    exactly    in    figures.      This    is    analogous    to 


The  Preliminaries  of  Political  Economy.       121 

what  Dr.  Maudsley  tells  us  he  has  observed  of 
anxiety. 

All  these  seem  to  be  traces  of  new  laws  which 
already  diminish,  and  in  future  times  may  still 
more  limit,  the  multiplying  power  of  mankind ;  but 
the  fullest  acknowledgment  of  them  does  not  con- 
tradict the  primary  assumption  made  by  abstract 
Political  Economy.  It  will  still  remain  true,  at 
present,  that  if  all  people  had  as  many  children  as 
they  could,  they  could  not  provide  for  them  as  they 
think  they  ought — perhaps  could  not  provide  for 
them  at  all.  Nor  is  it  easy  to  imagine  a  future 
time  when  causes  such  as  these  should  have  so 
exceedingly  diminished  the  sexual  feelings  as  to 
make  voluntary  restraint  of  them  needless.  Those 
feelings  certainly  are  incredibly  strong  now,  in  com- 
parison with  the  forces  which  it  is  thought  will 
hereafter  supplant  them.  It  is  easy  to  believe  that 
the  necessity  for  voluntary  restraint  should  be 
diminished,  but  it  is  not  easy  even  to  imagine  that 
this  necessity  should  be  extinguished. 

In  the  same  way  this  primary  axiom  would  not 
be  impaired  if  it  could  be  proved  that  aristocracies, 
as  such,  tend  to  have  fewer  children  than  other 
classes.  Aristocracies  are  so  small  a  fraction  of 
mankind  that  the  particular  rate  of  their  increase 
is  not  important  enough  to  alter  much  the  rate  of 
increase  of  mankind,  or  even  of  a  nation  as  a  whole. 
But  though  this  tendency  of  aristocracies  has  often 
been  imagined,  it  has  never  been  proved,  and,  indeed, 
it  never  will  be,  for  it  can  be  easily  disproved.  The 
most  obvious  and  conclusive  fact  against  it  is  that 


122  Economic  Studies. 

the  English  aristocracy  have  more  children  than 
the  average  of  Englishmen.  A  common  observer  of 
society  would,  indeed,  expect  to  find  this.  He  would 
remember  that  the  peers  now  differ  very  little  from 
the  rest  of  the  English  gentry ;  that  the  English 
gentry  are,  as  a  rule,  healthy  and  not  dissipated 
men ;  that  peers  in  general  are  married  early.  All 
these  characteristics  make  them  likely  to*  have  more 
children  than  other  people,  and,  in  fact,  they  have 
more.  The  theor}'  that  aristocracies  of  necessity 
diminish  in  number  fails  in  this  case  even  ludicrously, 
for  that  theory  attributes  to  the  persons  it  selects 
a  deficiency  in  the  very  particulars  in  which  they 
were  likely  to  excel,  and  do  excel. 

But  though  this  assumption  as  to  the  multiplying 
power  of  the  people  is  true  of  by  far  the  greater  part 
of  the  world,  and  of  most  ages,  it  is  not  true  of  all 
the  world  or  of  all  ages.  Like  the  other  primitive 
axiom  of  Political  Economy  as  to  land,  it  fails  where 
"new"  countries  are  occupied  by  old  races.  I  have 
already  spoken  of  the  strange  chance  which  has  un- 
peopled so  great  a  part  of  the  world  just  when 
civilised  people  wanted  to  go  there.  It  is  strange  to 
think  how  different  would  have  been  the  fate  of  this 
and  of  coming  generations,  if  America  and  Australia 
had  possessed  imperfect  but  thickly  populated  civil- 
isations, like  those  of  China  and  of  India.  In 
climate,  and  in  all  external  circumstances,  America 
seems  as  fit  for  an  early  civilisation  as  India. 
Happily,  however,  it  did  not  possess  one,  nor  did 
Australia.  There  is  nothing  there  now  left  to 
cumber   the   ground.     A    race    rich    in  the    arts    of 


The  Preliminaries  of  Political  Economy.       123 

civilisation  is  thus  placed  in  a  country  rich  in  un- 
owned but  fertile  land.  And  in  these  countries 
there  is  no  check  on  population.  Those  who  can 
live  there — who  are  the  kind  of  people  that  can  bear 
the  necessary  rudeness  and  can  live  there — can 
multiply  as  fast  as  they  like ;  they  will  be  able  to 
support  their  children  in  the  rough  comfort  of  such 
countries  ;  those  children  will  not  be  in  the  least 
likely  to  die  off  from  want  or  from  disease ;  on  the 
contrary,  they  will  be  as  likely  to  live  as  any 
children  of  the  human  race.  The  possible  maximum 
of  multiplication  is  there  reached,  and  yet  none  of 
the  multipliers  are  deteriorated  in  the  scale  of  the 
life,  or  in  any  of  their  circumstances. 

And  it  is  necessary  to  take  most  careful  account 
of  this  exceptional  case,  because  it  vitally  affects 
the  present  life  of  present  commercial  nations,  to 
which  Political  Economy  is  meant  to  be  an  approxi- 
mation. The  existence  of  those  nations  is  vitally 
affected  by  the  results  of  this  exception,  and  there- 
fore those  results  must  not  be  neglected.  It  follows 
from  those  results  that  Political  Economy  is  not  the 
'*  dismal  science"  which  it  was  thought  to  be  years 
ago,  and  which  many  people  still  imagine  it  to  be. 
It  does  not  teach  that  of  necessity  there  will  be, 
as  time  goes  on,  a  greater  and  greater  difficulty  in 
providing  for  the  increase  of  mankind.  It  assumes 
as  an  indisputable  fact,  a  present  difficulty,  but  it 
does  not  assume,  or  say,  that  this  difficulty  will  in- 
crease. That  augmentation  of  difficulty  will  not 
arise,  first,  because  some  of  the  inhabitants  of  old 
countries    can    emigrate    to    new    countries,    where 


124  Economic  Studies. 

people  may  increase  as  fast  as  they  can  ;  secondly, 
because  those  emigrants  produce  more  than  they 
want  in  bare  subsistence,  and  can  send  home  a 
surplus  to  those  who  remain  behind ;  thirdly, 
because  even  in  the  old  countries  the  growing  im- 
provement in  the  arts  of  production  is  likely,  at 
least,  to  counterbalance  the  inevitable  difficulty  of 
a  gradual  resort  to  less  favoured  and  fertile  soils. 

This  short  explanation  will,  I  think,  be  enough  to 
give  a  rude  idea  of  the  science  of  Political  Economy 
in  its  present  form.  If  I  were  writing  a  professed 
book  on  the  science,  there  would  be  much  more  to 
be  said  on  the  subject.  But  I  hope  what  has  been 
said  will  be  enough  to  make  plain  the  rest  of  this 
book.  I  am  to  speak  of  the  creators  of  Political 
Economy,  and  to  criticise  them,  and,  unless  as  much 
as  this  had  been  said,  the  necessary  considerations 
could  scarcely  have  been  lucidly  explained. 


i25 


ADAM  SMITH  AND  OUR  MODERN 
ECONOMY. 

I. 

If  we  compare  Adam  Smith's  conception  of  Political 
Economy  with  that  to  which  we  are  now  used,  the 
most  striking  point  is  that  he  never  seems  aware 
that  he  is  dealing  with  what  we  should  call  an 
abstract  science  at  all.  The  Wealth  of  Nations 
does  not  deal,  as  do  our  modern  books,  with  a 
fictitious  human  being  hypothetically  simplified,  but 
with  the  actual  concrete  men  who  live  and  move. 
It  is  concerned  with  Greeks  and  Romans,  the  nations 
of  the  middle  ages,  the  Scotch  and  the  English,  and 
never  diverges  into  the  abstract  world.  Considering 
the  natural  progress  of  opulence  as  an  item  in  greater 
studies,  as  part  of  the  natural  growth  of  human 
civilisation,  Adam  Smith  always  thought  how  it  had 
been  affected  by  human  nature,  taken  as  a  whole. 

Adam  Smith  approximates  to  our  modern  political 
economist,  because  his  conception  of  human  nature 
is  so  limited.  It  has  been  justly  said  that  he 
thought  "there  was  a  Scotchman  inside  every  man". 
His  Theory  of  Moral  Sentiment,  indeed,  somewhat 
differs  in  tone,  but  all  through  The  Wealth  oj 
Nations,  the  desire  of  man  to  promote  his  pecuniary 
interest  is  treated  as  far  more  universally  intense, 
and  his  willin":ness  to  labour  for  that  interest  as  far 


126  Economic  Studies. 


more  easier  and  far  more  commonly  diffused,  than 
experience  shows  them  to  be.  Modern  economists,  in- 
structed by  a  larger  experience,  well  know  that  the 
force  of  which  their  science  treats  is  neither  so  potent 
nor  so  isolated  as  Adam  Smith  thought.  They 
consistently  advance  as  an  assumption  what  he  more 
or  less  assumes  as  a  fact. 

Perhaps  a  little  unfairly,  nothing  has  more  con- 
duced to  the  unpopularity  of  modern  political 
economists,  and  to  the  comparative  fame  of  Adam 
Smith,  than  this  superiority  of  their  view  over  his. 
Of  course  Adam  Smith  was  infinitely  too  sensible  a 
man  to  treat  the  desire  to  attain  wealth  as  the  sole 
source  of  human  action.  He  much  overrated  its 
sphere  and  exaggerated  its  effect,  but  he  was  well 
aware  that  there  was  much  else  in  human  nature 
besides.  As  a  considerate  and  careful  observer  of 
mankind,  he  could  not  help  being  aware  of  it. 
Accordingly  he  often  introduces  references  to  other 
motives,  and  describes  at  length  and  in  an  interesting 
way  what  we  should  now  consider  non-economic 
phenomena ;  and,  therefore,  he  is  more  intelligible 
than  modern  economists,  and  seems  to  be  more 
practical.  But  in  reality  he  looks  as  if  he  were  more 
practical,  only  because  his  analysis  is  less  complete. 
He  speaks  as  if  he  were  dealing  with  all  the  facts  of 
human  nature,  when  he  is  not ;  modern  economists 
know  their  own  limitations ;  they  would  no  more 
undertake  to  prescribe  for  the  real  world,  than  a  man 
in  green  spectacles  would  undertake  to  describe  the 
colours  of  a  landscape.  But  the  mass  of  mankind 
have  a  difficulty  in  understanding  this.     They  think 


Adam  Smith  and  our  Modern  Economy.       127 

Adam  Smith  practical  because  he  seems  to  deal  with 
all  the  real  facts  of  man's  life,  though  he  actually 
exaggerates  some,  and  often  omits  others ;  but  they 
think  modern  economists  unpractical  because  they 
have  taken  the  most  business-like  step  towards  real 
practice^ — that  of  dealing  with  things  one  at  a  time. 

And  it  is  precisely  this  singular  position  of  Adam 
Smith  which  has  given  him  his  peculiar  usefulness. 
He  fulfilled  two  functions.  On  the  one  hand,  he 
prepared  the  way  for,  though  he  did  not  found,  the 
abstract  science  of  Political  Economy.  The  con- 
ception of  human  nature  which  underlies  The  Wealth 
of  Nations  is  near  enough  to  the  fictitious  man  of 
recent  economic  science  to  make  its  reasonings 
often  approximate  to,  and  sometimes  coincide  with, 
those  which  the  stoutest  of  modern  economists 
might  use.  The  philosophical  and  conscious  approxi- 
mation which  we  now  use  has  been  gradually  framed 
by  the  continual  purification  of  the  rough  and  vague 
idea  which  he  employed.  In  this  way  Adam  Smith 
is  the  legitimate  progenitor  of  Ricardo  and  of  Mill. 
Their  books  would  not  have  been  written  in  the  least 
as  they  now  are,  most  likely  would  never  have  been 
written  at  all,  unless  Adam  Smith,  or  some  similar 
writer,  had  written  as  he  has.  But,  on  the  other 
hand,  Adam  Smith  is  the  beginner  of  a  great 
practical  movement  too.  His  partial  conception  of 
human  nature  is  near  enough  to  the  entire  real  truth 
of  it  to  have  been  assumed  as  such  in  his  own  mind, 
and  to  be  easily  accepted  as  such  by  the  multitude  of 
readers.  When  he  writes,  he  writes  about  what 
interests  most  practical  men  in  a  manner  which  every 


128  Economic  Studies. 

one  will  like  who  is  able  to  follow  any  sort  of  written 
reasoning;  and  in  his  time  there  was  a  great  deal 
of  most  important  new  truth,  which  most  practical 
people  were  willing  to  learn,  and  which  he  was 
desirous  to  teach.  It  is  difficult  for  a  modern 
Englishman,  to  whom  "  Free  Trade"  is  an  accepted 
maxim  of  tedious  orthodoxy,  to  remember  sufficiently 
that  a  hundred  years  ago  it  was  a  heresy  and  a  para- 
dox. The  whole  commercial  legislation  of  the  world 
was  framed  on  the  doctrines  of  Protection ;  all 
financiers  held  them,  and  the  practical  men  of  the 
world  were  fixed  in  the  belief  of  them.  "  I  avow," 
says  Monsieur  Mollien,  the  wise  Finance  Minister  of 
the  first  Napoleon,  "to  the  shame  of  my  first 
instructors,"  the  previous  officials  of  France,  "  that 
it  was  the  book  of  Adam  Smith,  then  so  little  known, 
but  which  was  already  decried  by  the  administrators 
with  whom  I  had  served,  which  taught  me  better  to 
appreciate  the  multitude  of  points  at  which  public 
finance  touches  every  family,  and  which  raised 
judges  of  it  in  every  household."  There  were  many 
Free  Traders  before  Adam  Smith,  both  writers  and 
men  of  business,  but  it  is  only  in  the  antiquarian 
sense  in  which  there  were  "  poets  before  Homer,  and 
kings  before  Agamemnon  ".  There  was  no  great 
practical  teacher  of  the  new  doctrine ;  no  one  who 
could  bring  it  home  to  the  mass  of  men ;  who  con- 
nected it  in  a  plain  emphatic  way  with  the  history  of 
the  past  and  with  the  facts  of  the  present ;  who  made 
men  feel  that  it  was  not  a  mere  "  book  theory," 
but  a  thing  which  might  be,  and  ought  to  be,  real. 
And  thus    (by   a   good   fortune   such   as   has  hardly 


Adam  Smith  and  our  Modern  Economy.       129 

happened  to  any  other  writer)  Adam  Smith  is  the 
true  parent  of  Mr.  Cobden  and  the  Anti-Corn  Law 
League,  as  well  as  of  Ricardo  and  of  accurate 
Political  Economy.  His  writings  are  semi-concrete, 
seeming  to  be  quite  so,  and,  therefore,  they  have 
been  the  beginning  of  two  great  movements,  one  in 
the  actual,  and  the  other  in  the  abstract  world. 

Probably  both  these  happy  chances  would  have 
amazed  Adam  Smith,  if  he  could  have  been  told  of 
them.  As  we  have  seen,  the  last  way  in  which  he 
regarded  Political  Economy  was  as  a  separate  and 
confined  speciality;  he  came  upon  it  as  an  insepar- 
able part  of  the  development  of  all  things,  and  it 
was  in  that  vast  connection  that  he  habitually  con- 
sidered it.  The  peculiar  mode  of  treating  the  sub- 
ject which  we  now  have,  had  never  occurred  to  him. 
And  the  idea  of  his  being  the  teacher,  who  more  than 
any  one  else  caused  Free  Trade  to  be  accepted  as 
the  cardinal  doctrine  of  English  policy,  would  have 
been  quite  as  strange  to  him.  He  has  put  on  record 
his  feeling:  "To  expect,  indeed,  that  the  freedom 
of  trade  should  ever  be  entirely  restored  in  Great 
Britain,  is  as  absurd  as  to  expect  that  an  Oceania 
or  Utopia  should  ever  be  established  in  it.  Not  only 
the  prejudices  of  the  public,  but  what  is  much  more 
unconquerable,  the  private  interests  of  many  indi- 
viduals, irresistibly  oppose  it.  Were  the  officers  of 
the  army  to  oppose  with  the  same  zeal  and  unanimity, 
any  reduction  in  the  number  of  forces,  with  which 
master  manufacturers  set  themselves  against  every 
law  that  is  likely  to  increase  the  number  of  their 
rivals  in  the  home  market ;  were  the  former  to  ani- 

9 


130  Economic  Studies. 

mate  their  soldiers,  in  the  same  manner  as  the  latter 
inflame  their  workmen,  to  attack  with  violence  and 
outrage  the  proposers  of  any  such  regulation ;  to 
attempt  to  reduce  the  army  would  be  as  dangerous 
as  it  has  now  become  to  attempt  to  diminish  in  any 
respect  the  monopoly  which  our  manufacturers  have 
obtained  against  us.  This  monopoly  has  so  much 
increased  the  number  of  some  particular  tribes  of 
them,  that,  like  an  overgrown  standing  army,  they 
have  become  formidable  to  the  Government,  and 
upon  many  occasions  intimidate  the  legislature. 
The  member  of  Parliament  who  supports  every  pro- 
posal for  strengthening  this  monopoly  is  sure  to 
acquire  not  only  the  reputation  of  understanding 
trade,  but  great  popularity  and  influence  with  an 
order  of  men  whose  numbers  and  wealth  render 
them  of  great  importance.  If  he  opposes  them,  on 
the  contrary,  and  still  more  if  he  has  authority 
enough  to  be  able  to  thwart  them,  neither  the  most 
acknowledged  probity,  nor  the  highest  rank,  nor  the 
greatest  public  services  can  protect  him  from  the 
most  infamous  abuse  and  detraction,  from  personal 
insults,  nor  sometimes  from  real  danger,  arising 
from  the  insolent  outrage  of  furious  and  disappointed 
monopolists." 

Yet,  in  fact,  the  "  Utopia "  of  Free  Trade  was 
introduced  into  England  by  the  exertions  of  the 
"master  manufacturers,"  and  those  who  advocated 
it,  and  who  were  "thought  to  understand  trade," 
said  that  they  had  learned  the  doctrines  they  were 
inculcating  from  The  Wealth  of  Nations  above  and 
beyond  every  other  book. 


Adam  Smith  and  our  Modern  Economy.      131 


II. 

If  we  look  at  The  Wealth  of  Nations  as  if  it 
were  a  book  of  modern  Political  Economy,  we 
should  ask  four  questions  about  it. 

(i)  What,  by  its  teaching,  is  the  cause  which 
makes  one  thing  exchange  for  more  or  less  of  other 
things  ? 

(2)  What  are  the  laws  under  which  that  cause 
acts  in  producing  these  things  ? — the  full  reply 
to  which  gives  the  laws  of  population  and  growth 
of  capital. 

(3)  If  it  turns  out  (as  of  course  it  does)  that 
these  things  are  produced  by  the  co-operation  of 
many  people,  what  settles  the  share  of  each  of  those 
people  in  those  things,  or  in  their  proceeds  ?  The 
answer  to  this  question  gives  what  are  called  the 
laws  of  distribution, 

(4)  If  this  co-operation  costs  something  (as  of 
course  it  does),  like  all  other  co-operations,  who  is 
to  pay  that  cost,  and  how  is  it  to  be  levied  ?  The 
reply  to  this  inquiry  is  the  theory  of  taxation. 

To  persons  who  have  not  been  much  accustomed 
to  think  of  these  subjects,  these  questions  may 
seem  a  little  strange.  They  will  be  apt  to  think 
that  I  ought  to  have  spoken  of  the  laws  of  wealth 
and  of  its  production  and  distribution,  rather  than 
of  the  causes  which  make  one  thing  exchange  for 
more  or  less  of  other  things,  and  of  the  consequent 
laws.  But  the  truth  is  that  for  the  purposes  of 
Political  Economy,  "  wealth "  means  that  which 
possesses  exchange  value,  and  on  that  ground  Arch- 


132  Economic  Studies. 


bishop  Whately  wanted  to  call  the  science  "  catal- 
lactics  ".  The  air  and  the  sunlight — the  riches  ot 
nature — are  nothing  in  Political  Economy,  because 
every  one  can  have  them,  and  therefore  no  one  will 
give  anything  for  them.  '*  Wealth  "  is  not  such  for 
economic  purposes,  unless  it  is  scarce  and  transfer- 
able, and  so  desirable  that  some  one  is  anxious  to 
give  something  else  for  it.  The  business  of  the 
science  is  not  with  the  general  bounty  of  nature  to 
all  men,  but  with  the  privileged  possessions — bodily 
and  mental  powers  included — which  some  have,  and 
which  others  have  no*.. 

Unluckily  when  we  come  to  inquire  what  makes 
these  things  exchange  for  more  or  less  of  value,  one 
among  another,  we  find  ourselves  in  the  middle  of 
a  question  which  involves  many  and  difficult  ele- 
ments, and  which  requires  delicate  handling.  Most 
of  the  difficulties  which  are  felt  in  reflecting  on  the 
entire  subject  are  owing  to  a  deficient  conception 
of  the  primitive  ingredient.  And  this  will  surprise 
no  one  conversant  with  the  history  of  science,  for 
most  errors  in  it  have  been  introduced  at  the 
beginning,  just  as  the  questions  which  a  child  is  apt 
to  ask  are  in  general  the  ones  which  it  is  hardest  to 
answer. 

It  is  usual  to  begin  treating  the  subject  by  suppos- 
ing a  state  of  barter,  and  this  is  in  principle  quite 
right,  for  "money"  is  a  peculiar  commodity  which 
requires  explanation,  and  the  simplest  cases  of  ex- 
change take  place  without  it.  But  it  is  apt  to  be 
forgotten  that  a  state  of  barter  is  not  a  very  easy 
thing  fully  to  imagine.     The  very  simplicity  which 


Adam  Smith  and  our  Modern  Economy.       133 

renders  it  useful  in  speculation,  makes  it  more  and 
more  unlike  our  present  complex  experience.  Hap- 
pily, though  barter  has  died  out  of  the  adult  life  of 
civilised  communities,  there  remains  an  age  when 
we,  most  of  us,  had  something  to  do  with  it.  To 
schoolboys  money  is  always  a  scarce  and  often  a 
brief  possession,  and  they  are  obliged  to  eke  out 
the  want  by  simpler  expedients.  The  memories  of 
most  of  us  may  help  them  in  the  matter,  though 
their  present  life  certainly  will  not. 

Suppose,  then,  that  one  boy  at  school  has  a  ham 
sent  him  from  home  (those  who  object  to  trivial 
illustrations  must  be  sent  back  to  the  Platonic 
Socrates  to  learn  that  they  are  of  the  most  special 
use  in  the  most  difficult  matters,  and  be  set  to  read 
the  history  of  philosophy  that  they  may  learn  what 
becomes  of  the  pomposity  which  neglects  them),  and 
suppose  that  another  boy  has  cake,  and  that  each 
has  more  of  his  own  than  he  cares  for  and  lacks 
something  of  the  other,  what  are  the  proportions 
in  which  they  will  exchange  ?  If  boy  A  likes  his 
own  ham  scarcely  at  all,  or  not  very  much,  and  if  he 
is  very  fond  of  cake,  he  will  be  ready  to  barter  a 
great  deal  of  it  against  a  little  of  boy  B's  cake;  and 
if  boy  B  is  fond  of  cake  too  and  does  not  care  so 
much  for  ham,  cake  will  be  at  a  premium,  and  a 
very  little  of  it  will  go  a  great  way  in  the  transaction, 
especially  if  the  cake  is  a  small  one  and  the  ham  a 
big  one  ;  but  if,  on  the  contrary,  both  boys  care 
much  for  ham,  and  neither  much  for  cake,  and  also 
the  ham  be  small  and  the  cake  large,  then  the  ham 
will  be  at  a  premium,  the  cake  at  a  discount,  and 


134  Economic  Studies. 


both  sides  of  the  exchange  will  be  altered.  The  use 
of  this  simplest  of  all  cases  is  that  you  see  the 
inevitable  complexity  of,  and  that  you  cannot 
artificially  simplify,  the  subject.  There  are  in  every 
exchange,  as  we  here  see,  no  less  than  six  elements 
which  more  or  less  affect  it  in  general ;  first,  the 
quantities  of  the  two  commodities,  and  next,  two 
feelings  in  each  exchanger — first,  his  craving  for  the 
commodity  of  the  other,  and  secondly,  his  liking  or 
disinclination  for  his  own.  In  every  transaction, 
small  or  great,  you  will  be  liable  to  blunder  unless 
you  consider  all  six. 

The  introduction  of  money  introduces  in  this 
respect  no  new  element.  The  inseparable  use  of 
that  incessant  expedient  is  that  which  ingrains  into 
civilised  life  the  abstract  idea  of  a  "purchasing 
power " ;  of  a  thing  which,  when  possessed,  will 
obtain  all  other  things.  And  independently  of  the 
hand-to-hand  use  of  money,  this  idea  of  it  as  a 
universal  equivalent,  with  the  consequent  means 
of  counting,  has  been  incalculably  beneficial  to 
civilisation.  But  into  a  mere  single  interchange 
its  use  introduces  nothing  new.  Money,  in  that 
aspect,  is  simply  a  desirable  commodity ;  it  often 
happens  to  be  particularly  coveted,  but  at  other 
times,  in  comparison  with  some  simpler  and  more 
essential  things,  its  worth  is  insignificant. 

Nor  do  the  common  bargains  of  commerce  contain 
any  additional  ingredient.  There  are  always  six 
things  to  be  considered.  Suppose  that  a  holder  of 
^10,000  "  Peruvians "  wants  to  sell  them  on  the 
London  Exchange,  the  price  he  will  get  will  obvi- 


Adam  Smith  and  our  Modern  Economy.      135 

ously  vary  with  the  quantity  of  Peruvian  stock  there 
is  about  in  the  market,  and  the  quantity  of  money 
which  the  owners  are  ready  to  invest  in  it ;  but  also 
according  to  four  other  things. 

First, — Whether  he  is  anxious  for  money  or  not ; 
if  he  has  a  bill  to  meet  to-morrow  morning  and  must 
have  money,  the  chances  are  great  that  some  one 
will  take  advantage  of  his  necessities,  and  he  will 
have  to  take  less ;  if,  on  the  other  hand,  he  be  a  rich 
man — a  strong  holder,  as  the  phrase  is — he  will  say, 
"Ah,  if  I  cannot  get  my  price  to-day  I  will  wait  till 
to-morrow,"  and  so  he  will  get  a  better  price. 

Secondly, — Even  if  he  is  not  violently  in  want  of 
money,  the  price  will  vary  according  as  he  thinks 
"Peruvians"  more  or  less  likely  to  fall  or  not.  If 
he  thinks  them  a  declining  or  "treacherous"  stock, 
he  will  be  anxious  to  get  rid  of  them,  and  will  be  less 
difficult  as  to  price ;  if  he  had  private  and  peculiar 
knowledge  that  Peru  was  about  to  imitate  Spain 
and  to  stop  payment  the  next  day,  he  will  sell  at 
once  for  any  price  that  those  not  in  the  secret  would 
be  ready  to  give  him.  In  these  two  ways  the  bargain 
would  be  influenced  by  the  mental  state  of  the  seller, 
and  it  will  be  influenced  in  two  ways  also  by  the 
mental  state  of  the  buyer. 

Thirdly, — If  the  buyer  is  desirous  of  the  article, 
because  he  thinks  it  will  get  rapidly  up,  he  of  course 
will  give  more  than  if  he  thinks  it  is  likely  to  be 
stationary,  or  even  for  a  time  to  fall.  He  will 
"  discount "  the  prospect  of  improvement,  as  the 
market  phrase  has  it. 

Fourthly, — If  he   can    make    little  of  his  money 


136  Economic  Studies. 


in  other  ways,  say,  if  it  is  earning  2  per  cent.,  he 
will  be  ready  to  put  it  into  "  Peruvians  "  at  a  much 
lower  price  than  he  would  if  he  could  get  7  per  cent, 
for  it  in  other  ways.  If  there  were  a  crisis,  and 
money  had  risen  in  value  to  10  per  cent.,  he  would 
hardly  put  it  out  of  his  own  control  by  buying 
"  Peruvians "  with  it,  at  any  price,  no  matter  how 
low.  He  would  prize  the  money  at  such  a  time, 
because  in  a  general  disturbance  it  may  often  be  used 
to  untold  advantage,  or  may  save  its  owner  from  ruin. 

In  the  bargains  in  all  other  commodities  the  same 
considerations  have  to  be  taken  account  of,  and  no 
others.  A  bargain  in  foreign  stocks  or  railway 
shares  is  in  essentials  the  same  as  one  in  corn  or 
cheese.  The  same  six  elements  are  in  each  case  to 
be  thought  of,  and  no  others. 

Every  transaction  in  commerce  is  in  a  legal  sense 
separate  ;  it  is  a  contract  in  which  one  side  engages 
to  do  certain  things  in  return  for  certain  other  things 
which  are  to  be  done  by  the  other  side.  But  in  a 
practical  sense  most  important  commercial  pheno- 
mena are  interlaced  one  with  another.  The  feelings 
of  each  seller  as  to  parting,  or  not  parting,  with  his 
goods,  are  mainly  caused — or  much  caused  at  any 
rate — by  the  amount  of  goods  which  other  dealers 
have  now  in  or  are  about  to  bring  to  market,  and 
also  by  what  he  imagines  to  be  their  '*  strength  "  or 
"  weakness  "  ;  that  is,  their  more  or  less  of  inclination 
to  part  with  their  goods  or  to  retain  them  in  every 
market,  and  a  most  able  living  economist  ^  has  justly 

1  Professor  Jevons'  TJieory  of  Political  Economy,  page  84. 


Adam  Smith  and  our  Modern  Economy.       137 

observed  that  now-a-days  this  is  what  we  mean  by 
"a  market"  ;  the  estimate  formed  of  all  which  the 
dealers  have,  and  of  all  which  they  expect  to  have, 
is  all  pretty  much  collected  into  one  corporate 
opinion,  which  floats  variously  about  upon  the  lips  of 
men,  though  often  it  would  not  be  easy  to  condense 
into  a  formula,  or  to  bring  it  home  on  evidence  to 
any  single  speaker.  For  the  most  part  it  is  an  im- 
bibed, not  a  discovered,  fact,  that  the  market  is 
"  dull,  and  likely  to  be  dull,"  "  lively,  and  likely  to 
be  so ".  These  are  in  part  truths  of  observation, 
but  in  part  also  accredited  hypotheses.  A  market 
knows  its  own  present  state,  and  anticipates  its  own 
future,  by  signs  which  an  outside  observer  would  not 
see,  and  by  the  unconscious  contribution  of  many 
minds  to  a  daily  growing  opinion.  A  market  in  the 
higher  commercial  sense  of  the  word — in  the  sense 
in  which  we  speak  of  the  ''money  market  "—does 
not  mean,  as  it  once  did,  a  place  where  goods  were 
exposed,  but  an  historical  result  of  the  proximity  of 
traders,  a  set  of  dealers  cognisant  of  one  another, 
and  acquainted  more  or  less  with  each  other's 
position,  and  each  other's  intentions. 

It  must  not  be  supposed,  however,  that  the  process 
of  bargain-making  approaches  in  general  to  a 
statistical  calculation.  A  person  proposing  to  buy, 
looks  at  a  trade  circular  to  see  what  the  writer  of  it 
thinks  the  price  is  ;  he  asks  the  broker  what  price 
has  been  given,  what  offered,  what  refused ;  he 
inquires  whether  holders  are  strong  or  weak,  whether 
they  are  under  supplied  or  over  supplied ;  he  asks  if 
other  buyers  are  many  or  few,  whether  they  are  eager 


138  Economic  Studies. 


or  indifferent,  whether  they  have  much  money,  or 
whether  they  have  little ;  and  out  of  these  inquiries 
he  forms  an  idea  of  the  price  at  which  he  is  likely  to 
buy  the  commodities.  A  person  intending  to  sell  a 
commodity  forms  in  like  manner  a  notion  of  the  price 
he  is  likely  to  obtain  for  it ;  on  the  surface  the  appear- 
ance is  often  frivolous  enough.  Many  persons  go 
about  inquiring,  "  In  what  state  do  you  think  the 
market,  sir  ?  "  and  getting,  as  it  would  seem,  not 
much  reply  in  return.  But  underneath  there  are 
some  of  the  keenest  anxieties  and  most  ardent  hopes 
of  human  nature.  A  large  quantity  of  goods  is  on 
the  market,  by  selling  which  many  holders  must  live, 
if  they  live  at  all.  A  great,  though  uncertain, 
quantity  of  money  is  in  the  market,  which  the  owners 
mean  to  live  by  investing.  The  main  interest  of 
many  lives  is  at  stake,  and  the  subsistence  of  many 
families,  little  as  on  the  outside  the  market  looks  so. 

On  the  whole,  then,  we  may  sum  the  matter  up 
thus  : — 

Firstly, — That  a  bargain  will  be  struck  when  four 
conditions  are  satisfied,  viz. : — 

''When  the  seller  thinks  he  cannot  obtain  more 
from  the  buyer  with  whom  he  is  dealing,  or  from  an}- 
other; 

"  When  he  is  sufficiently  desirous  to  sell  his  article, 
or  enough  in  want  of  money  to  take  that  price  ; 

"  When  the  buyer  thinks  that  he  cannot  obtain 
the  article  for  less,  either  from  that  seller  or  from  any 
one  else ; 

"W^hen  he  is  so  eager  for  the  article,  or  so 
anxious  to  invest  his  mone}-,  as  to  give  it." 


Adam  Smith  and  our  Modern  Economy.       139 

Secondly, — That  every  barg^ain  is  a  datum  for 
other  bargains,  and  influences  the  opinions  on  which 
they  are  based. 

Thirdly, — That  the  average  price  of  such  bargains 
is  the  market  price. 

Fourthly, — That  the  main  elements  of  market 
price  are  those  which  prevail  in  most  bargains,  viz., 
the  actual  quantity  of  the  article  in  the  market,  the 
quantity  of  money  actually  ready  to  be  invested  in 
it,  and  the  average  strength  with  which  the  wish  to 
hold  the  article,  the  wish  to  acquire  it,  the  wish  to 
obtain  money,  and  the  wish  to  invest  it,  operate 
through  the  whole  class  of  buyers  and  of  sellers. 

These  formulae  may  seem  complex,  but  I  do  not 
think  that  any  of  them  can  be  left  out  or  shortened 
except  by  omitting  necessary  facts.  ^ 

An  attempt  is,  indeed,  commonly  made  to  abbre- 
viate these  rules.  Very  much  the  same  is  meant  by 
the  common  phrase  that  market  price  is  determined 
by  "  supply  and  demand,"  which  is  a  good  phrase 
enough  when  you  know  how  to  manage  it.  But  the 
effect  of  using  so  few  words  for  so  much  meaning  is 
that  they  are  continually  being  used  in  various 
senses ;  no  one  signification  of  the  terms  can  be 
stretched  over  the  whole  matter.  And  in  con- 
sequence a  literature  has  come  to  exist  discussing 
their  ambiguities.  The  most  obvious  objection  is 
hat,  if  the  w  ords  are  taken  in  their  natural  sense, 
they  imply  a  relation  between  two  things  of  wholly 
different  natures ;  demand  is  a  desire  in  the  mind, 

1  See  Note  A  on  Market  Price  at  Ihe  end  of  the  volume. 


140  Economic  Studies. 


supply  a  quantity  of  matter ;  how  then  can  there  be 
an  equahty  between  them  ?  And  even  when  demand 
is  used  in  the  best  sense,'  for  the  quantity  of  money 
or  purchasing  power,  the  formula  has  the  defect  of 
mentioning  only  the  two  quantities  of  the  changing 
commodities,  of  not  saying  that  they  are  only 
estimates  of  quantities,  and  of  not  warning  those  who 
use  it  that  they  must  likewise  consider  the  other 
elements — the  four  wishes  of  the  two  exchangers. 

It  is  most  important  to  be  clear  upon  the  matter, 
because  confusion  about  it  has  led,  and  still  leads, 
to  many  most  mischievous  fallacies.  For  example, 
it  has  been  vigorously  argued  that  "  Trades  Unions  " 
could  not  alter  the  price  of  labour.  "  The  supply, 
the  number  of  labourers,"  it  was  said,  "  is  the  same 
as  before,  and  also  the  demand,  viz.,  the  quantity  of 
money  wanting  to  buy  labour — the  two  causes  being 
thus  identical,  the  effect  cannot  be  different."  But, 
in  fact,  a  Trades  Union  establishment  at  once  alters 
the  mental  conditions.  It  turns  the  labourer,  in  the 
Stock  Exchange  language,  from  a  weak  holder  into 
a  strong  one ;  it  enables  him  to  hold.  Before,  he 
must  either  take  the  master's  terms  or  starve  ;  now, 
he  has  money  to  live,  and  will  often  get  more,  be- 
cause he  can  stand  out  for  a  good  bargain. 

The  complete  view  of  the  facts  thus  effaces  at 
once  the  ingrained  mistake  of  the  last  generation. 

^  See  the  admirable  dissertation  of  Professor  Cairnes, 
Leading  Principles,  pages  17-40.  A  most  ingenious  collec- 
tion of  the  difficulties  of  the  doctrine  of  supply  and  demand  as 
usually  stated,  will  be  found  in  Thornton  on  Labour,  book 
ii.  cap.  I. 


Adam  Smith  and  our  Modern  Econuiny.       141 

and  it  also  destroys  as  quickly  a  recent  error  now 
common.  It  is  imagined  that  because  Trades  Unions 
have  sometimes  raised  wages  to  some  extent,  they 
can  raise  them,  at  any  rate  gradually,  to  any  extent. 
But  we  now  see  the  limit  of  their  power.  They 
can  only  win  when  the  funds  of  the  Union  are 
stronger  than  the  funds  of  the  capitalists ;  and  this 
will  sometimes  be  so,  and  sometimes  not  be  so.  A 
clear  view  of  the  facts  also  explains  (that  which  is 
a  difficulty  in  the  ordinary  theory)  the  difference 
between  a  speculative  market  and  an  ordinary  one. 
So  long  as  it  is  imagined  that  market  price  is 
determined  by  the  supply  of  the  article  in  the 
market,  and  the  money  here  eager  to  buy  it,  it  is 
not  possible  to  explain  why  two  markets  in  which 
both  these  elements  coincide  should  be  so  different 
as  a  dull  market  and  an  excited  one  always  are. 
But  as  soon  as  we  understand  that  we  have  to  deal 
likewise  with  opinions  and  with  wishes,  we  see 
how  there  is  great  scope  for  discrepancy  and  for 
mutability. 

Again,  on  another  side  of  the  subject,  it  has  been 
incessantly  said  that  (at  all  events  since  the  Act 
of  1844,  which  limits  the  power  of  issue)  the  Bank 
of  England  cannot  alter  the  rate  of  discount. 
There  exists,  it  is  said,  a  certain  number  of  bills, 
and  a  certain  amount  of  money  ready  to  be  invested 
in  bills,  and  this  determines  the  way  in  which  one 
will  be  exchanged  for  the  other.  But,  in  fact,  much 
of  such  money  is  held  by  the  Bank  of  England, 
and  the  fact  of  its  being  unwilling  to  lend,  inevitably 
alters  "the  equation  of  exchange".     The  desire  of 


142  Economic  Studies. 


the  principal  dealers  to  operate,  or  not  to  operate, 
is  a  vital  element  in  every  market.  When  you  read 
in  the  jargon  of  trade  circulars  that  "  yarns  are 
sluggish,  and  that  teas  are  lively,"  the  palliation 
for  the  use  of  these  ridiculous  adjectives  is  that  in 
the  facts  described  there  is  as  much  of  mental 
state  as  of  physical  supply. 

It  is  in  consequence  of  the  extreme  importance 
of  these  mental  elements  that  in  all  markets  you 
hear  so  much  of  "  flying  and  often  concocted 
rumours".  On  the  Stock  Exchange  "the  lie  of 
the  day,"  as  Dr.  Johnson  would  have  called  it, 
always  has  some  influence,  because  the  momentary 
wishes  of  sellers  to  sell,  and  buyers  to  buy,  are 
greatly  affected  by  what  they  hear  as  to  possible 
wars  and  revolutions  of  the  nations  whose  debts 
they  are  buying  and  selling.  The  best  States  only 
care  for  such  rumours  at  critical  instants,  but  more 
or  less  the  repute  of  minor  ones  lies  at  the  "  truth 
of  him  that  makes  it,"  and  their  credit  is  incessantly 
talked  up  and  talked  down  much  more  than  they 
themselves  desire. 

The  league  of  the  moment — "  rig,"  "  ring,"  "  syndi- 
cate," or  "  pool,"  or  what  not — "  one  form  with  many 
names" — operates  in  the  same  way.  It  is  a  mental 
expedient  for  changing  the  mental  state  of  the  market. 
'By  combining,  the  same  persons  are  able  to  make 
the  same  amount  of  speech  and  the  same  amount 
of  money  go  farther.  They  affect  opinion  more, 
because  they  say  the  same  things,  and  they  are 
more  tenacious  holders,  or  more  desperate  buyers, 
because  they  rely  one  on  another. 


Adam  Smith  and  our  Modern  Economy.      143 

We  see,  too,  from  this  analysis  why  it  is  that 
one  man  is  a  good  seller  and  another  a  bad  one 
A  good  seller  is  a  good  advocate,  who  acts  eifec- 
tualiy  on  the  opinions  and  feelings  of  persons  inclined 
to  deal  with  him,  who  makes  them  think  that  the 
article  is  very  excellent,  that  it  is  growing  very 
scarce,  that  it  is  going  to  be  scarcer,  that  a  great 
many  people  are  wanting  it,  that  much  money  is 
going  to  be  had  for  it,  that  the  holders  in  general  are 
anxious  not  to  sell  as  yet  because  they  believe  it 
will  get  dearer,  that  he  himself  is  above  all  unwill- 
ing to  part  with  his  article  and  will  do  so  only  as 
a  personal  favour.  He  weakens  the  judgment  and 
intensifies  the  desire  of  his  opponent  as  he  wishes. 

The  requisites  of  a  good  buyer  are  in  essentials 
the  same.  He  also  is  an  advocate,  only  on  the  other 
side.  He  has  to  show  that  the  article  in  question 
IS  undesirable,  that  it  is  plentiful,  that  most  holders 
are  most  anxious  to  sell  it,  that  few  persons,  and 
those  with  little  money,  are  coming  forward  to  buy 
it,  that  though,  perhaps,  he  might  himself  be  in- 
duced to  buy  a  little  of  it,  yet  it  would  only  be  under 
peculiar  circumstances,  and  as  a  matter  of  private 
feeling.  There  is,  indeed,  a  common  saying  that  a 
good  buyer  is  much  rarer  than  a  good  seller ;  and  I 
believe  that  the  Manchester  warehouse-keepers,  as 
they  are  called — that  is,  the  great  dealers  in  under- 
clothing,— great  traders,  but  who  do  not  produce 
anything,  and  must  therefore  both  largely  buy  and 
sell — give  higher  salaries  to  their  buyers  than  to 
their  sellers.  But  this  is  only  because  the  buyers 
are  the  advocates  who  have  to   address  the  more 


144  Economic  Studies. 

skilled  audience.  They  buy  of  a  few  manufacturers 
who  understand  business  well,  and  must,  therefore, 
be  careful  what  they  say.  The  sellers  for  the  firm, 
who  distribute  the  goods  among  the  country  shops, 
have  people  of  very  inferior  intelligence  to  deal  with. 
A  few  good  buyers,  therefore,  purchase  what  many 
less  qualified  sellers  dispose  of.  But  in  its  essence 
the  business  is  identical.  It  consists  in  exciting 
desire  and  in  modifying  opinion. 

It  may  strike  some  people  that  if  prices  thus 
depend  on  casual  opinions  and  on  casual  desires,  it 
is  odd  that  prices  in  markets  should  be  so  uniform 
on  particular  days  in  particular  markets  as  they 
really  are.  But  in  fact,  at  ordinary  times,  these 
casual  opinions  and  casual  desires  form  a  sort  of 
average.  The  timid  seller  is  emboldened  by  know- 
ing that  others  are  courageous ;  the  necessitous  by 
knowing  that  others  are  strong  ;  the  cautious  buyer 
is  forced  on  because  he  knows  that  eager  ones  will 
outstrip  him ;  the  adventurous  is  restrained  because 
he  knows  that  others  have  doubts,  and  so  on  through 
the  whole  subject.  In  the  infancy  of  trade  no  doubt 
there  is  ample  room  for  great  variations.  A  most 
graphic  observer^  has  said  of  Oriental  markets: 
"  The  necessities  of  a  savage  are  soon  satisfied,  and 
unless  he  belong  to  a  nation  civilised  enough  to  live 
in  permanent  habitations,  and  secure  from  plunder, 
he  cannot  accumulate,  but  is  only  able  to  keep  what 
he  is  actually  able  to  carry  about  his  own  person. 
Thus,  the  chief  at  Lake  N'gomi  told  Mr.  Andersson 

^  Galton's  Art  of  Travel,  under  "Presents  and  Articles 
for  Payment ". 


Adam  Smith  and  our  Modern  Economy.       145 


that  his  beads  would  be  of  little  use,  for  the  women 
about  the  place  already  '  grunted  like  pigs '  under  the 
burden  of  those  that  they  wore,  and  which  they  had 
received  from  previous  travellers." 

In  civilised  times  facts  are  known,  advocacy  is 
weak,  and  prices  are  usually  uniform.  But  they  are 
not  so  at  a  commercial  crisis ;  then,  as  the  phrase 
goes,  prices  are  very  "wide".  A  necessitous  seller 
must  sell,  and  he  pulls  down  the  price  for  an  instant, 
but  if  a  buyer  is  stimulated  by  this,  and  wants  to 
buy  more  at  the  same  price,  he  will  find  that  he 
cannot  do  it.  There  are  no  more  equally  necessitous 
sellers  in  the  market ;  the  rest  do  not  want  money 
for  the  instant,  and  will  not  sell,  except  at  a  much 
higher  price.  At  such  a  moment,  too,  skilful  people 
will  act  on  the  fears  of  others.  I  have  heard  it  said 
of  a  bland  and  delicate  operator,  who  was  ultimately 
very  successful,  that  at  critical  times  "  he  encouraged 
others  to  be  frightened  ".  And  in  panics  cool  heads 
and  strong  nerves  make  much  by  dealing  with  weak 
nerves  and  hot  heads.  But  in  common  times  the 
contrary  tendencies  are  subdued  to  an  average.  The 
most  anxious  seller  will  depress  a  good  stock  but 
very  little,  and  the  most  eager  will  raise  it  but  a 
little  also. 

I  have  been  obliged  to  state  the  facts  carefully, 
before  discussing  Adam  Smith's  doctrine,  because  I 
could  not  otherwise  make  an  attempt  to  estimate  it 
intelligibly,  and  I  must  go  on  with  some  further 
facts  also,  or  even  that  estimate  would  be  broken  and 
faulty.  At  a  glance  it  is  plain  that  the  doctrine  of 
exchange  which  I  have  sketched,  cannot  be  the  final 

10 


146  Economic  Studies. 


theory.  It  depends  on  the  relative  quantity  of  two 
things,  but  as  most  things  can  be  increased  at  will 
by  human  labour,  men  have,  therefore,  in  most  cases 
the  means  of  making  these  quantities  what  they 
please,  and  therefore  these  quantities  cannot  be 
ultimate  causes.  "  Supply  and  demand  "  cannot  be 
final  regulators  of  value,  for  in  most  cases  men  can 
supply  what  they  like,  and  to  finish  the  subject  we 
must  know  when  they  will  begin  to  do  so,  and  when 
they  will  leave  off. 

The  first  answer  to  be  given  to  these  questions 
s,  that  producers  who  produce  in  order  to  receive 
something  m  exchange  for  their  products,  will  go  on 
producing  as  long  as  the  gain,  pleasure,  satisfaction 
(whatever  word  you  choose  to  use)  they  receive  from 
that  something  is  a  sufficient  compensation  to  them 
for  the  bore  and  irksomeness  of  production,  and  they 
will  stop  producing  when  it  ceases  to  be  sufficient. 
In  an  early  state  of  society  it  is  easy  to  imagine 
simple  cases  of  this.  In  the  times  of  which  the 
Scandinavian  "  kitchenmiddings  "  are  the  only  extant 
vestige,  the  population  lived  partly  by  hunting  and 
partly  by  fishing ;  most,  I  suppose,  did  both  ;  some 
confined  themselves  to  that  which  they  did  best.  In 
that  case  a  hunter,  who  only  hunted,  would  work  as 
long  as  the  fish  received  in  exchange  seemed  to  him 
to  repay  the  trouble  of  hunting ;  a  fisherman,  who 
only  fished,  would  do  the  same.  The  man  who  tat- 
tooed the  population  would  continue  to  do  so  as  long 
as  the  game  or  the  fish  he  received  in  return  seemed 
to  make  it  worth  his  while.  The  polisher  of  flint 
implements  or  bones  would  do  just  the  same.     The 


Adam  Smith  and  our  Modern  Economy.       147 


essence  of  the  whole  is  the  exchange  of  the  produce 
of  much  labour  and  very  little  capital,  so  long  as  the 
labourer  thinks  what  he  thus  obtains  repays  him  for 
his  labour.  And  the  same  thing  goes  on  down  to  the 
end  of  civilisation  in  a  subordinate  way.  An  old 
woman  gathers  laver  on  the  sea-shore  of  Somerset- 
shire as  long  as  any  one  will  give  the  pittance  she 
expects  for  it.  A  diver  will  bring  up  pearls  as  long 
as  any  one  will  give  what  he  thinks  is  enough  to 
make  it  worth  while  to  go  to  the  bottom  of  the  sea 
for  them.  The  primitive  form  of  production  still 
exists,  and  the  primitive  estimate  of  recompense,  but 
in  most  cases  they  exist  as  "  survivals "  only.  In 
two  remarkable  instances,  of  which  I  shall  speak 
hereafter,  they  still  alter  the  main  tide  of  commerce. 
But  for  the  most  part  the  interest  of  the  transactions 
is  principally  antiquarian ;  little  money  is  now  made 
by  them,  but  they  are  worth  thinking  of  now  and 
then,  because  they  remind  us  of  what  once  was  the 
only  way  in  which  the  relative  value  of  commodities 
was  finally  determined  in  the  world. 

The  main  part  of  modern  commerce  is  carried  on 
in  a  very  different  manner.  It  begins  at  a  different 
point,  and  ends  at  a  different  point.  The  funda- 
mental principle  is,  indeed,  the  same;  the  determin- 
ing producer — the  person  on  whose  volition  it  de- 
pends whether  the  article  shall  be  produced  or  not — 
goes  on  so  long  as  he  is  satisfied  with  his  recompense, 
and  stops  when  he  ceases  to  be  so  satisfied.  But 
this  determining  producer  is  now  not  a  labourer  but 
a  capitalist.  In  nine  hundred  and  ninety-nine  cases 
out  of  every  thousand,  it  is  the  capitalist  and  not  the 


148  Economic  Studies, 


labourer  who  decides  whether  or  not  an  enterprise 
shall  be  commenced,  and  therefore  whether  the  con- 
sequent commodity  shall  come  on  the  market.  He 
buys  his  labour  just  as  he  buys  his  raw  material ;  he 
may  calculate  wrongly  in  both  cases,  he  may  think 
he  will  buy  when  labour  or  material  is  cheaper  than 
it  turns  out  that  he  can ;  but  his  calculation  will  be 
the  critical  element  in  the  whole  business ;  that 
which  decides  whether  it  shall  or  shall  not  be  entered 
upon. 

This  change  has  occurred  in  the  organisation  of 
industry,  because  the  new  mode  of  organising  it  is 
infinitely  more  efficient  than  the  old.  A  body  of 
separate  labourers  has  many  of  the  characteristics 
of  a  mob;  but  one  acting  under  the  control  of  a 
capitalist  has  many  of  those  of  an  army.  A  capitalist 
provides  his  labourers  with  subsistence,  directs  each 
what  he  shall  do  and  when,  and  educes  the  desired 
result  of  the  whole  combination  at  the  proper  time, 
much  as  a  general  does.  He  and  his  men  will  live 
and  will  produce  riches  where  a  mere  multitude  of 
labourers  will  starve.  When,  in  very  modern  times, 
it  has  been  endeavoured  in  schemes  of  "  co-operation  " 
to  enable  labourersto  subsist  without  dependence  on  an 
individual  capitalist,  it  has  been  necessary,  under  cloak 
of  the  combination,  to  invent  a  capitalist  in  disguise. 
A  common  fund  subscribed  beforehand,  an  elected 
board  to  invest  it,  a  selected  manager  to  combine  it, 
are  all  refined  expedients  for  doing  in  a  complex  way 
what  the  single  rich  capitalist  does  in  a  simple  way ; 
even  yet  we  do  not  know  how  far  they  can  be  applied 
with  comparable  efficiency.     In  simpler  times  the  rich 


Adam  Smith  and  our  Modern  Economy.      149 

man  who  has  much  beforehand,  buys  the  labour  of 
his  poorer  neighbours  who  have  nothing,  and  directs 
their  power  towards  results  which  no  one  of  them 
could  perhaps  have  conceived,  and  which  a  thousand 
times  as  many,  without  his  controlling  mind,  would 
have  been  impotent  to  produce.  On  one  point,  how- 
ever, the  point  which  is  most  material  for  the  present 
purpose,  the  old  organisation,  or  disorganisation,  of 
mere  labourers  acting  separately,  and  the  exact 
modern  industry,  where  enterprise  depends  on  the 
fiat  of  the  capitalist,  are  alike ;  and  are  so  because 
human  nature  is  alike  both  in  capitalist  and  labourer. 
Neither  of  them  will  take  much  trouble  to  obtain  in 
one  way  that  which  he  can  obtain  with  very  little 
trouble  in  another  way.  As  far  as  labour  can  migrate 
from  employment  to  employment,  articles  produced 
by  the  same  labour  will  exchange  for  one  another. 
If  it  were  not  so,  the  labourers  who  worked  at  the 
thing  which  fetched  least  would  be  throwing  away 
some  of  their  labour;  they  would  do  better  to  pro- 
duce something  else,  and  in  the  end  they  would  do 
so.  In  the  same  way,  as  far  as  capital  (including 
the  capital  which  buys  labour)  can  be  transferred 
from  employment  to  employment,  things  produced 
with  the  same  amount  of  capital,  in  similar  times  and 
similar  circumstances,  exchange  one  for  another. 
When  it  is  not  so,  capital  tends  to  go  from  the  pur- 
suit in  which  it  is  less  profitably  employed  to  those 
in  which  it  is  more  so. 

As  might  be  expected,  the  modern  organisation  is 
much  more  perfect  in  this  respect  as  in  most  others. 
Labour  always  circulates  from  employment  to  employ- 


150  Economic  Studies. 

ment.  "Whatever,"  says  Adam  Smith,  "obstructs 
the  free  circulation  of  labour  from  one  employment 
to  another,  obstructs  that  of  stock  likewise ;  the 
quantity  of  stock  which  can  be  employed  in  any 
branch  of  business  depending  very  much  upon  that 
of  the  labour  which  can  be  employed  in  it.  Cor- 
poration laws,  however,  give  less  obstruction  to  the 
free  circulation  of  stock  from  one  place  to  another 
than  to  that  of  labour.  It  is  everywhere  much 
easier  for  a  wealthy  merchant  to  obtain  the  privilege 
of  trading  in  a  town  corporate,  than  for  a  poor  arti- 
ficer to  obtain  that  of  working  in  it.  The  obstruction 
which  corporation  laws  give  to  the  free  circulation  of 
labour  is  common,  I  believe,  to  every  part  of  Europe. 
That  which  is  given  to  it  by  the  poor  laws  is,  so  far 
as  I  know,  peculiar  to  England.  It  consists  in  the 
difficulty  which  a  poor  man  finds  in  obtaining  a 
settlement,  or  even  in  being  allowed  to  exercise  his 
industry  in  any  parish  but  that  to  which  he  belongs. 
It  is  not  the  labour  of  artificers  and  manufacturers 
only  of  which  the  free  circulation  is  obstructed  by 
corporation  laws.  The  difficulty  of  obtaining  settle- 
ments obstructs  even  that  of  common  labour." 

Man  is  of  all  pieces  of  luggage  the  most  difficult  to 
be  removed.  In  general  an  ill-paid  labourer  early  in 
life  gives  hostages  to  misfortune,  he  burdens  himself 
with  the  support  of  a  wife  and  children  ;  he  cannot 
move,  or  they  would  starve.  But  civilisation  has 
invented  an  elaborate  machinery  for  holding  capital 
in  a  transferable  form.  The  basis  of  this  machinery 
is  the  invention  of  money.  One  of  the  uses  of  money 
is  that  it  is  a  mode  in  which  capital  may  be  held  with- 


Adam  Smith  and  out  Modern  Economy.      151 

out  loss  in  what  may  be  called  a  provisional  form. 
All  capital  originally  comes  from  production — is,  say, 
so  much  corn,  or  tin,  or  hemp — but  if  a  man  holds 
corn,  or  any  other  commodity,  he  may  not  be  able  to 
exchange  it  in  a  little  while  for  so  much  as  he  can  to- 
day. Most  commodities  are  in  their  nature  perish- 
able, and  most  others  are  liable  to  depreciation  from 
the  change  in  human  desires.  But  money  is  always 
wanted,  for  it  will  buy  everything ;  any  one  who  is 
not  sure  how  he  will  ultimately  employ  his  capital 
can  hold  it  in  the  form  of  money.  This  provisional 
state — this  interval  of  non-employment — is  a  great 
security  for  the  substantial  equality  of  equal  capitals 
in  equal  employments,  for  it  gives  capitalists  time  to 
look  before  them  and  see  what  they  should  select 
because  it  will  yield  most,  and  what  they  should 
avoid  because  it  will  yield  least. 

But  in  this,  its  elementary  form,  the  machinery 
for  holding  capital,  so  to  say,  in  expectation,  has  an 
obvious  defect ;  the  capitalists  derive  no  income  from 
it  while  it  is  in  a  state  of  indecision.  "  Money  is 
barren,"  according  to  the  old  saying,  and  whoever 
holds  mere  coin  will  certainly  derive  no  income. 
But  in  countries  where  banking  is  well  developed, 
the  machinery  is  far  more  efficient ;  a  man  who  has 
capital  lying  idle  can  place  it  with  a  banker,  who,  if 
he  will  agree  to  give  some  notice  before  he  withdraws 
it,  will  agree  to  pay  him  some  interest  on  it.  This 
interest,  as  far  as  it  goes,  is  a  source  of  income 
during  the  period  of  suspended  investment,  and  is 
something  on  which  the  capitalist  can  subsist  with- 
out trenching  on  his  capital,  and  without  hurrying 


152  Economic  Studies. 


to  a  premature  use  of  it.  This  capital  awaiting  in- 
vestment the  banker  employs  in  the  same  way  that 
he  employs  the  unused  balances  of  people's  income, 
and  that  is  in  lending  to  the  trades  which  are  at  the  mo- 
ment most  profitable.  As  I  have  elsewhere  explained : 
"  Political  Economists  say  that  capital  sets  towards 
the  most  profitable  trades,  and  that  it  rapidly  leaves 
the  less  profitable  and  non-paying  trades.  But  in 
ordinary  countries  this  is  a  slow  process,  and  some 
persons  who  want  to  have  ocular  demonstration  of 
abstract  truths  have  been  inclined  to  doubt  it, 
because  they  could  not  see  it.  In  England,  how- 
ever, the  process  would  be  visible  enough  if  you 
could  only  see  the  books  of  the  bill  brokers  and  the 
bankers.  Their  bill  cases  as  a  rule  are  full  of  the 
bills  drawn  in  the  most  profitable  trades,  and,  ccBteris 
paribus,  in  comparison  empty  of  those  drawn  in  the 
less  profitable.  If  the  iron  trade  ceases  to  be  as 
profitable  as  usual,  less  iron  is  sold  ;  the  fewer  the 
sales  the  fewer  the  bills ;  and  in  consequence  the 
number  of  iron  bills  in  Lombard  Street  is  diminished. 
On  the  other  hand,  if  in  consequence  of  a  bad 
harvest  the  corn  trade  becomes  on  a  sudden  profit- 
able, immediately  'corn  bills'  are  created  in  great 
numbers,  and,  if  good,  are  discounted  in  Lombard 
Street.  Thus  English  capital  runs  as  surely  and 
instantly  where  it  is  most  wanted,  and  where  there 
is  most  to  be  made  of  it,  as  water  runs  to  find  its 
level." 

In  this  way  "  expectant  capital,"  while  it  is  so  ex- 
pectant, forms  part  of  a  fund  which  is  lent  now  to 
this  trade,  and   now  to  that,   according  as  for  the 


Adam  Smith  and  our  Modern  Economy.      153 


moment  each  trade  is  more  profitable ;  and  at  last 
instructed  by  reflection,  its  owner  will  invest  it,  other 
things  being  equal,  in  the  trade  which  offers  the 
most  for  it.  In  its  temporary  use  it  tends  to  equalise 
temporary  profits ;  in  its  permanent  use  it  does  so 
too. 

No  doubt  some  callings  are  naturally  pleasant, 
others  unpleasant ;  some  encouraged  by  opinion, 
others  adverse  to  it ;  some  easy  to  learn,  some 
difficult ;  some  easy  to  enter,  others  hedged  in  by 
tradition  and  privilege ;  some  abounding  in  risk, 
some  with  little  of  it.  But  our  principle  is  not 
affected  by  these.  It  is  that,  non-pecuniary  en- 
couragements and  discouragements  being  reckoned, 
capitals  employed  in  all  trades  yield  an  equal  return 
in  equal  times. 

What  that  return  will  be  it  would  be  premature 
here  to  speak  of  It  is  only  necessary  to  say  that  it 
is  such  as  the  capitalist  will  think  worth  while  to 
invest  his  capital  for,  enough,  that  is,  to  compensate 
him  for  the  inevitable  trouble  and  attendant  risk ; 
if  it  is  not  enough  he-  will  let  it  continue  uninvested 
at  interest,  or  will  eat  it  up  and  live  on  it. 

We  must  carefully  bear  in  mind,  too,  that  the 
rule  that  equivalent  returns  are  made  to  equal  capi- 
tals in  the  same  times,  is  only  true  of  employments 
between  which  capital  fluctuates  freely.  This  is  to 
an  almost  perfect  extent  true  of  employments  in  this 
country,  and  to  a  great  extent,  though  far  from  an 
equal  extent,  to  all  employments  within  their  own 
country.  But  it  is  not  at  all  true  of  employments  in 
different  countries  ;  English  capital,  by  far  the  most 


154  Economic  Studies. 


locomotive  of  all  capitals,  will  not  go  abroad  for  the 
same  percentage  of  return  that  will  suffice  it  at 
home.  A  great  deal  of  the  capital  of  all  countries — 
by  far  the  greater  part  of  it  everywhere,  indeed — could 
hardly  on  any  terms  be  tempted  abroad.  We  have 
arrived,  however,  at  the  principle  that  within  the 
same  nation  all  commodities  will  tend  to  be  of  the 
same  exchangeable  value,  whose  cost  of  production 
is  identical,  and  that  this  cost  of  production  is  that 
which  the  capitalist  expends,  and  the  return  for 
which  he  is  willing  to  take  the  pains  of  expending  it. 
And  this  will  be  enough  for  our  present  purpose. 


III. 

On  all  these  subjects  Adam  Smith  wrote  in  an 
extinct  world,  and  one  of  the  objects  always  before 
him  was  to  destroy  now  extinct  superstitions.  In 
that  age  it  was  still  believed,  though  the  belief  was 
dwindling  away,  that  wealth  consisted  in  "  money," 
and  that  its  value  was  somehow  different  from  that 
of  anything  else.  As  Adam  Smith  himself  describes 
it :  "  That  wealth  consists  in  money,  or  in  gold  and 
silver,  is  a  popular  notion  which  naturally  arises  from 
the  double  function  of  money,  as  the  instrument  of 
commerce,  and  as  the  measure  of  value.  In  conse- 
quence of  its  being  the  instrument  of  commerce, 
when  we  have  money  we  can  more  readily  obtain 
whatever  else  we  have  occasion  for  than  by  means 
of  any  other  commodity.  The  great  affair,  we 
always  find,  is  to  get  money.  When  that  is  obtained, 
there  is  no  difficulty  in  making  any  subsequent  pur- 


Adam  Smith  and  our  Modern  Economy.      155 

chase.  In  consequence  of  its  being  the  measure  of 
value,  we  estimate  that  of  all  other  commodities  by 
the  quantity  of  money  which  they  will  exchange  for. 
We  say  of  a  rich  man  that  he  is  worth  a  great  deal, 
and  of  a  poor  man  that  he  is  worth  very  little 
money.  A  frugal  man,  or  a  man  eager  to  be  rich,  is 
said  to  love  money ;  and  a  careless,  a  generous,  or  a 
profuse  man,  is  said  to  be  indifferent  about  it.  To 
grow  rich  is  to  get  money ;  and  wealth  and  money, 
in  short,  are,  in  common  language,  considered  as  in 
every  respect  synonymous." 

No  true  theory  of  "  value  "  could  be  established 
till  this  false  theory  was  cleared  away.  So  long  as 
even  a  vestige  of  it  haunts  the  minds  of  thinkers  and 
learners,  they  cannot  think  or  learn  anything  on  this 
subject  properly.  And  therefore  Adam  Smith  applied 
his  whole  force  to  the  confutation  of  it.  His  success 
has  been  so  complete  that  it  has  made  this  part  of 
his  writings  now  useless.  No  one  now  thinks  or 
supposes  that  money  is  the  essence  of  wealth  ;  that 
it  is  anything  but  a  kind  of  wealth,  having  distinct 
uses,  like  other  kinds.  The  strongest  interest  in 
reading  the  chapters  of  The  Wealth  of  Nations  on 
the  subject  is  given  by  the  vigour  with  which  they 
are  written.  They  are  essentially  models  of  practical 
writing  ;  they  are  meant  to  extirpate  living  error ; 
they  follow  that  error  into  the  minds  of  those  who 
believe  it,  and  extirpate  it  in  the  forms  in  which  it 
thrives  and  rules  there.  The  error  that  the  precious 
metals  are  the  only  real  wealth,  was  a  living  error 
to  Adam  Smith,  for  he  had  lived  with  many  persons 
who  held  it. 


156  Economic  Studies. 

The  efficacy  of  Adam  Smith's  refutation  is  not 
wholly  derived  exactly  from  its  literary  merit.  Hume 
had  before  given  a  brief  exposure,  which  in  mere 
writing  is  at  least  as  good.  But  Hume  impressed 
on  this,  as  on  so  much  else,  a  certain  taint  of  para- 
dox. He  seems  to  be  playing  with  his  subject ;  he 
hardly  appears  to  believe  what  he  says,  and  a  plain 
reader  is  often  puzzled  to  know  whether  he  ought 
to  believe  it  either.  On  a  strong-headed  man  of 
business,  semi-insincere  exposition  produces  no  effect. 
But  Adam  Smith  takes  up  the  subject  in  a  solid, 
straightforward  way,  such  as  he  knew  would  suit  the 
Glasgow  merchants  with  whom  he  had  once  lived, 
and  he  talks  to  them,  not  only  as  a  man  acquainted 
with  present  mercantile  things,  but  also  as  one 
possessing  much  other  culture  and  authority.  He 
impressed  practical  men  by  his  learning,  at  the  same 
time  that  he  won  them  by  his  lucidity  and  assured 
them  by  his  confidence. 

But  when  we  pass  from  the  refutation  of  ancient 
errors  to  the  establishment  of  coherent  truth,  we 
shall  not  be  equally  satisfied.  Students  are,  indeed, 
still  sometimes  told  that  they  will  find  such  truth  in 
Adam  Smith,  but  those  who  had  nothing  else  to 
read,  and  who  wanted  to  read  accurately,  did  not 
find  it  so.  What  in  fact  a  student  will  find  in  Adam 
Smith  is  a  rough  outline  of  sensible  thoughts ;  not 
always  consistent  with  themselves,  and  rarely  stated 
with  much  precision  ;  often  very  near  the  truth, 
though  seldom  precisely  hitting  it ;  a  great  mental 
effort  in  its  day,  though  always  deficient  in  the  con- 
secutiveness  required  by  careful  learners,  and,  except 


Adam  Smith  and  our  Modern  Economy.      157 


for  the  purpose  of  exciting  an  interest  in  the  subject, 
altogether  superseded  and  surpassed  now. 

"  Gold  and  silver,  however,"  says  Adam  Smith, 
"  like  every  other  commodity,  vary  in  their  value, 
are  sometimes  cheaper  and  sometimes  dearer,  some- 
times of  easier  and  sometimes  of  more  difficult  pur- 
chase. The  quantity  of  labour  which  any  particular 
quantity  of  them  can  purchase  or  command,  or  the 
quantity  of  other  goods  which  it  will  exchange  for, 
depends  always  upon  the  fertility  or  barrenness  of  the 
mines  which  happen  to  be  known  about  the  time 
when  such  exchanges  are  made.  The  discovery  of 
the  abundant  mines  of  America  reduced  in  the  six- 
teenth century  the  value  of  gold  and  silver  in  Europe 
to  about  a  third  of  what  it  had  been  before.  As 
it  cost  less  labour  to  bring  those  metals  from  the 
mine  to  the  market,  so  when  they  were  brought 
thither  they  could  purchase  or  command  less  labour ; 
and  this  revolution  in  their  value,  though  perhaps 
the  greatest,  is  by  no  means  the  only  one  of  which 
history  gives  some  account.  But  as  a  measure  of 
quantity,  such  as  the  natural  foot,  fathom,  or  hand- 
ful, which  is  continually  varying  in  its  own  quantity, 
can  never  be  an  accurate  measure  of  the  quantity  of 
other  things ;  so  a  commodity  which  is  itself  con- 
tinually varying  in  its  own  value  can  never  be  an 
accurate  measure  of  the  value  of  other  commodities. 
Equal  quantities  of  labour,  at  all  times  and  places, 
may  be  said  to  be  of  equal  value  to  the  labourer.  In 
his  ordinary  state  of  health,  strength  and  spirits,  in 
the  ordinary  degree  of  his  skill  and  dexterity,  he 
must  always  lay  down  the  same  portion  of  his  ease, 


15S  Economic  Studies. 

his  liberty,  and  his  happiness.  The  price  which  he 
pays  must  always  be  the  same,  whatever  may  be  the 
quantity  of  goods  which  he  receives  in  return  for  it. 
Of  these,  indeed,  it  may  sometimes  purchase  a 
greater  and  sometimes  a  smaller  quantity ;  but  it  is 
their  value  which  varies,  not  that  of  the  labour 
which  purchases  them.  At  all  times  and  places  that 
is  dear  which  it  is  difficult  to  come  at,  or  which  it 
costs  much  labour  to  acquire  ;  and  that  cheap  which  is 
to  be  had  easily,  or  with  very  little  labour.  Labour 
alone,  therefore,  never  varying  in  its  own  value,  is 
alone  the  ultimate  and  real  standard  by  which 
the  value  of  all  commodities  can  at  all  times  and 
places  be  estimated  and  compared.  It  is  their 
real  price ;  money  is  their  nominal  price  only." 

But  in  the  present  day  it  is  not  true  at  all  that 
things  are  dear  simply  in  proportion  to  the  mere 
labour  which  it  has  cost  to  produce  them.  A 
thousand  men's  labour  assisted,  say,  by  ten  steam- 
engines,  will  produce  many  more  valuable  things 
than  a  thousand  men's  labour  without  those  steam- 
engines.  The  result  of  the  labour  of  the  two  sets 
of  men  will  not  exchange  for  one  another  at  all. 
Besides  immediate  labour  there  is  a  vast  apparatus 
of  the  assisting  results  of  past  labour.  These  must 
be  paid  for  in  some  way,  or  their  owner  will  not  let 
them  be  used.  There  is  something  else  essential 
to  modern  industry  besides  labour,  and  that  is  saving, 
or  the  refraining  from  the  immediate  consumption 
of  past  labour.  Sometimes  this  saving  is  used  to 
co-operate  with  labour,  as  in  machines,  sometimes 
to  support  it,  as  with  food  and  necessaries.     But  in 


Adam  Smith  and  our  Modern  Economy.      159 


either  case  its  existence  must  be  remunerated,  and 
its  use  paid  for.  As  modern  economists  say,  the 
value  of  an  article  must  be  such  as  to  compensate 
not  only  for  the  labour,  but  for  the  abstinence  by  which 
it  was  produced. 

Again, — Adam  Smith  speaks  of  the  quantity  of 
labour  which  a  commodity  will  buy,  as  if  it  were 
identical  with  the  quantity  of  labour  by  which  it 
was  produced.  He  says :  "  Every  man  is  rich  or 
poor  according  to  the  degree  in  which  he  can  afford 
to  enjoy  the  necessaries,  conveniences,  and  amuse- 
ments of  human  life.  But  after  the  division  of 
labour  has  once  thoroughly  taken  place,  it  is  but  a 
very  small  part  of  these  with  which  a  man's  own 
labour  can  supply  him.  The  far  greater  part  of 
them  he  must  derive  from  the  labour  of  other  people, 
and  he  must  be  rich  or  poor  according  to  the  quantity" 
of  that  labour  which  he  can  command,  or  which  he 
can  afford  to  purchase.  The  value  of  any  commodity, 
therefore,  to  the  person  who  possesses  it,  and  who 
means  not  to  use  or  consume  it  himself,  but  to  ex- 
change it  for  other  commodities,  is  equal  to  the 
quantity  of  labour  which  it  enables  him  to  purchase 
or  command.  Labour,  therefore,  is  the  real  measure 
of  the  exchangeable  value  of  all  commodities.  The 
real  price  of  everything,  what  everything  really  costs 
to  the  man  who  wants  to  acquire  it,  is  the  toil 
and  trouble  of  acquiring  it.  What  everything  is 
really  worth  to  the  man  who  has  acquired  it,  and 
who  wants  to  dispose  of  it  or  exchange  it  for  some- 
thing else,  is  the  toil  and  trouble  which  it  can  save 
to  himself,   and  which    it    can    impose    upon    other 


i6o  Economic  Studies. 

people.  What  is  bought  with  money  or  with  goods 
is  purchased  by  labour,  as  much  as  what  we  acquire 
by  the  toil  of  our  own  body.  That  money  or  those 
goods  indeed  save  us  this  toil.  They  contain  the 
value  of  a  certain  quantity  of  labour  which  we  ex- 
change for  what  is  supposed  at  the  time  to  contain 
the  value  of  an  equal  quantity.  Labour  was  the 
first  price,  the  original  purchase  money  that  was 
paid  for  all  things.  It  was  not  by  gold  or  by  silver, 
but  by  labour,  that  all  the  wealth  of  the  world  was 
originally  purchased ;  and  its  value,  to  those  who 
possess  it,  and  who  want  to  exchange  it  for  some 
new  productions,  is  precisely  equal  to  the  quantity 
of  labour  which  it  can  enable  them  to  purchase  or 
command." 

But  the  quantity  of  labour  which  a  thing  will 
purchase  depends  on  the  degree  in  which  it  is  desired 
by  labourers.  A  grand  piano  in  a  coarse  community 
will  buy  less  labour  than  a  barrel  of  beer.  Mere 
labour  is  the  worst  "  measure  "  of  value  conceivable, 
because  it  varies  with  the  appetites  and  differs  with 
the  tastes  of  mankind.  There  is  nothing  more  un- 
certain, more  changeable,  or  more  casual  than  the 
number  of  days'  labour  that  an  article  will  purchase. 
As  some  one  expressed  it :  "  Gin  will  purchase  more 
than  it  ought,  and  tracts  less  than  they  ought ". 

Adam  Smith  did  not  put  the  matter  graphically 
enough  before  his  mind.  He  speaks  of  a  man's 
fortune  being  equal  "  to  the  quantity  either  of  other 
men's  labour,  or  what  is  the  same  thing,  of  the  pro- 
duce of  other  men's  labour  which  it  enables  him  to 
command ".     But    unless    you    suppose    that    some 


Adam  Smith  and  our  Modern  Economy.       i6i 


general  instrument  of  purchasing  power,  like  money, 
exists,  and  that  a  man's  fortune  consists  in  it,  the 
two  things  are  not  the  same  at  all.  One  man's 
fortune  may  consist  of  a  valuable  library,  which 
would  buy  no  manual  labour  at  all,  but  for  which 
bookish  people  would  barter  many  other  commodities; 
another  may  have  a  heap  of  coarse  meat  and  drink, 
which  will  bring  crowds  of  labourers  to  share  them, 
but  for  which  few  refined  persons  would  give  any- 
thing. 

Unquestionably,  as  has  been  shown,  in  a  rude 
state  of  society,  where  labour  is  the  principal  cost  of 
production,  two  articles  produced  with  the  same 
amounts  of  labour  will  tend  to  exchange  one  for 
another  because  every  labourer  will  tend  to  migrate 
to  the  place  where  his  labour  is  better  rewarded, 
and  leave  the  place  where  it  is  worse.  And  this  is 
what  Adam  Smith  vaguely  saw,  and  several  times 
meant  to  say,  but  he  did  not  exactly  say  it ;  he 
never  says  it,  and  often  says  something  quite 
different. 

In  another  passage  Adam  Smith  sets  forth  a 
similarly  vague  view  of  the  doctrine  of  exchangeable 
value  as  it  stands  after  capital  has  accumulated. 
But,  as  will  be  shown,  he  does  not  work  it  out  fully, 
and  he  does  not  reconcile  it,  or  feel  that  there  is  a 
difficulty  in  reconciling  it,  with  his  former  doctrine 
of  value  based  on  mere  labour,  and  yet  they  are 
plainly  incompatible.  "There  is,"  he  says,  "  in  every 
society  or  neighbourhood  an  ordinary  or  average 
rate   both    of  wages    and    profit    in    every    different 

employment    of    labour    and    stock.     This    rate    is 

II 


1 62  Economic  Studies. 

naturally  regulated,  as  I  shall  show  hereafter,  partly 
by  the  general  circumstances  of  the  society,  their 
riches  or  poverty,  their  advancing,  stationary  or 
declining  condition,  and  partly  by  the  particular 
nature  of  each  employment.  There  is  likewise  in 
every  society  or  neighbourhood  an  ordinary  or 
average  rate  of  rent,  which  is  regulated  too,  as  I 
shall  show  hereafter,  partly  by  the  general  circum- 
stances of  the  society  or  neighbourhood  in  which 
the  land  is  situated,  and  partly  by  the  natural  or  im- 
proved fertility  of  the  land.  These  ordinary  or 
average  rates  may  be  called  the  natural  rates  of 
wages,  profit,  and  rent,  at  the  time  and  place  in 
which  they  commonly  prevail.  When  the  price  of 
any  commodity  is  neither  more  nor  less  than  what 
is  sufficient  to  pay  the  rent  of  the  land,  the  wages 
of  the  labour,  and  the  profits  of  the  stock  employed 
in  raising,  preparing,  and  bringing  it  to  market, 
according  to  their  natural  rates,  the  commodity  is 
then  sold  for  what  may  be  called  its  natural  price. 
The  commodity  is  then  sold  precisely  for  what  it  is 
worth,  or  for  what  it  really  costs  the  person  who 
brings  it  to  market ;  for  though  in  common  language 
what  is  called  the  prime  cost  of  any  commodity  does 
not  comprehend  the  profit  of  the  person  who  is  to 
sell  it  again,  yet  if  he  sells  it  at  a  price  which  does 
not  allow  him  the  ordinary  rate  of  profit  in  his 
neighbourhood,  he  is  evidently  a  loser  by  the  trade  ; 
since  by  employing  his  stock  in  some  other  way  he 
might  have  made  that  profit.  His  profit,  besides, 
is  his  revenue,  the  proper  fund  of  his  subsistence. 
As,  while  he  is  preparing  and  bringing  the  goods  to 


Adam  Smith  and  our  Modern  Economy.       163 

market,  he  advances  to  his  workmen  their  wages,  or 
their  subsistence ;  vSO  he  advances  to  himself,  in  the 
same  manner,  his  own  subsistence,  which  is  gener- 
ally suitable  to  the  profit  which  he  may  reasonably 
expect  from  the  sale  of  his  goods.  Unless  they 
yield  him  this  profit,  therefore,  they  do  not  repay 
him  what  they  may  very  properly  be  said  to  have  really 
cost  him.  Though  the  price,  therefore,  which  leaves 
him  this  profit,  is  not  always  the  lowest  at  which  a 
dealer  may  sometimes  sell  his  goods,  it  is  the  low- 
est at  which  he  is  likely  to  sell  them  for  any  consider- 
able time ;  at  least  where  there  is  perfect  liberty,  or 
where  he  may  change  his  trade  as  often  as  he 
pleases." 

As  every  one  will  see,  this  second  doctrine  is  much 
more  like  real  life  than  the  former.  But  in  Adam 
Smith's  mind  it  did  not  supersede  it.  All  through 
The  Wealth  of  Nations  there  is  recurring  confusion 
between  three  things,  the  "  natural  price "  of  an 
article  estimated  as  in  the  above  passage,  the 
quantity  of  labour  required  to  make  it,  and  the 
quantity  of  labour  which  it  will  buy ;  of  which 
three  things  no  one  ever  for  the  most  part  coincides 
with  the  others. 

Even  this  second  exposition  contains  one  error, 
which  unfits  it  for  scientific  use,  and  which  the  sharp 
eye  of  Hume  at  once  perceived.  "  I  cannot  think," 
Hume  wrote,  "  that  the  rent  of  farms  makes  any 
part  of  the  price  of  produce.  "  And  very  clearly  it 
does  not.  For,  if  it  does,  of  what  farm  ?  The  rent 
of  various  pieces  of  corn-growing  land  varies  in- 
finitely ;  is  it  the  rent  of  the  dearest  which  enters 


164  Economic  Studies. 


into  the  price  of  the  half-and-half,  or  of  the  cheapest  ? 
We  know  that  the  price  of  corn  is  the  same,  no 
matter  on  what  quality  of  land  it  is  grown.  Does 
that  price  pay  the  rent  of  good,  of  indifferent,  or  of 
bad  land  ?  This  question  Adam  Smith  does  not 
answer,  nor  seemingly  does  the  necessity  of  answer- 
ing it  occur  to  him. 

On  the  other  hand,  it  must  be  owned  that  there  is 
a  great  naturalness  in  Adam  Smith's  idea.  It  is 
that  which  would  strike  every  one  on  a  first  view  of 
the  facts.  The  capitalist  pays  the  rent  of  the  land, 
just  as  he  pays  the  wages  and  buys  the  seed  corn ; 
and  it  is  as  much  necessary  that  he  should  be  re- 
couped for  the  payment  of  that  rent  as  for  either  of 
the  other  payments.  If  the  "rent"  of  the  farm  is 
not  an  element  in  the  price  of  the  corn,  how  then  is 
that  rent  to  be  paid  ? 

The  answer  is,  that  the  rent  of  extra  good  land  is 
paid  out  of  the  extra  quantity  (or  extra  good  quality) 
of  what  it  produces.  If  one  acre  of  land  yields  twice 
as  much  as  another,  it  will  answer  the  capitalist's 
purpose  to  pay  twice  as  much  for  its  use.  But  if  he 
does  pay  twice  as  much,  the  cost  at  which  he  will 
grow  each  ear  of  corn  will  be  the  same  as  that  of  the 
farmer  on  less  good  land ;  the  extra  fertility  will  be 
compensated  by  the  extra  rent.  It  may,  of  course, 
be  that  the  owner  of  the  best  land  will  farm  it  him- 
self, and  then  he  will  have  no  rent  to  pay  for  its  un- 
usual goodness.  But  he  will  not  sell  his  produce 
the  least  cheaper  for  that ;  he  will  get  all  that  he 
can  for  it.  We  have  seen  how  "  market  price  "  is 
determined :    it  depends   on  certain   desires   of  the 


Adam  Smith  and  our  Modern  Economy.      165 

seller  and  the  buyer,  in  part  generated  by  the  quan- 
tity of  the  article  and  the  quantity  of  money,  and  in 
part  not.  But  none  of  those  desires  would  make  a 
man  say :  "  I  produce  this  at  a  less  cost  than  others, 
and  therefore  I  will  let  them  charge  a  higher  price 
than  I  do  ".  No  producer  sets  himself  to  introduce 
fairness  into  the  reward  of  production,  by  letting 
those  who  possessed  less  facilities  than  he  did, 
receive  more  than  he  does.  The  nature  of  market- 
going  man  is  formed  quite  differently. 

The  only  reason  why  the  cost  of  production  in  the 
end  tends  to  determine  market  value  is  that  every 
one  who  wants  an  article  will  take  the  easiest  means 
to  get  it.  If  a  capitalist  wants  to  invest  his  money 
to  gain  an  income,  he  will,  cceteris  paribus,  be  apt  to 
engage  in  pursuits  which  are  reputed  profitable,  and 
to  avoid  those  which  are  reputed  unprofitable ;  and 
this  will  reduce  the  profits  of  all  trades  not  to  a  level, 
but  towards  a  level.  But  the  argument  assumes  that 
all  means  of  production  are  equally  open  to  every  one. 
If  any  one  has  exclusive  possession  of  an  especially 
good  opportunity,  he  will  get  something  out  of  it 
proportioned  to  that  especial  goodness.  The  owner 
of  extremely  good  land,  who  farms  it  himself,  will 
get  a  return  over  and  above  the  ordinary  rate  of 
profit  in  proportion  to  that  goodness.  He  will  sell  a 
great  deal  at  the  price  which  will  yield  the  required 
profit  to  those  who  can  sell  only  much  less. 

This  is  only  another  way  of  saying  that  the 
capital  which  yields  the  least  permanent  return — 
the  least  profit  for  which  farmers  as  a  class  will 
carry  on  agriculture — is  that  which  determines  the 


i66  Economic  Studies. 

price  of  agricultural  produce.  This  is  the  least 
which  the  farmer  in  the  long  run  will  sell  for,  and 
the  most  which  he  will  be  able  to  obtain  And  this 
capital  is  that  which  pays  the  least  rent. 

In  all  countries  where  land  is  easily  accessible  to 
capital,  that  "  least "  rent  is  no  rent,  because  land  is 
taken  into  cultivation  as  soon  as  its  cultivation  will 
pay  the  usual  profit,  and  because  after  it  is  in  culti- 
vation, more  and  more  capital  is  expended  upon  it, 
so  long  as  expenditure  meets  with  the  usual  return. 
The  production  of  valuable  thmgs  on  the  surface  of 
the  ground  is  exactly  like  the  extraction  of  valuable 
thmgs  from  beneath  that  surface.  It  is  the  worst 
mine  which  can  in  the  long  run  be  kept  going,  that 
in  the  long  run  determines  the  price  of  the  produce  ; 
the  owner  of  the  better  mine  does  not  sell  his  ore 
cheaper  than  his  neighbour,  because  he  can  get  that 
ore  at  less  cost  than  his  neighbour ;  the  best-circum- 
stanced miner  exacts  as  much  as  the  worst-circum- 
stanced miner  is  able  to  obtain.  And  the  "worst- 
circumstanced"  mine  pays  no  royalty  to  the  owner 
at  all  ;  it  only  pays  a  bare  profit  on  the  capital. 

Adam  Smith's  idea,  therefore,  that  in  ordinary 
circumstances  the  rent  of  land  entered  as  an  element 
into  the  price  of  agricultural  produce,  though  a  very 
natural  idea,  was  a  complete  mistake,  because  he 
could  not  have  told  what  rent  he  meant — the  rent 
of  best,  or  middling,  or  bad  land — and  because  much 
capital  employed  in  agriculture  yields  only  the 
ordinary  profit  on  capital,  and  therefore  pays  no  rent 
at  all.  The  mode  of  estimating  "  cost  of  production," 
given  by  Adam   Smith,  in  this  case  was  most  im- 


Adam  Smith  and  our  Modern  Economy.      167 

perfect,  because  one  of  its  terms  was  undetermined, 
a  variable  which  might  be  anything,  and  often  is 
nothing. 

This  opinion  of  Adam  Smith's  as  to  the  rent  of 
land  is  closely  connected  with  a  peculiar  opinion  of 
his  as  to  agriculture.  He  held  that  it  was  the  most 
profitable  employment  to  which  the  capital  and 
industry  of  a  country  could  be  directed.  This 
opinion,  like  many  of  his  others,  was  a  modification 
of  that  which  he  had  learned  in  France.  The 
economistes  in  Paris  at  that  time  held  that  agriculture 
was  the  only  profitable  occupation  of  labour  and 
capital.  And  it  would  take  many  pages  to  give  an 
account  in  the  least  comprehensible,  of  the  elaborate 
reasoning  by  which  they  had  persuaded  themselves 
of  this  ridiculous  result.  Adam  Smith,  of  course, 
rejected  it ;  his  strong  sense  particularly  revolted 
from  that  kind  of  argumentative  absurdity.  But  he 
was  nevertheless  influenced  by  it.  Though  he  did 
not  hold  agriculture  to  be  the  only  source  of  profit, 
he  held  that  it  was  a  particularly  prolific  one.  "  It 
keeps  three  people,"  he  would  have  said,  "  the 
landlord,  the  capitalist  farmer,  and  the  labourer; 
manufacturers  and  trade  keep  only  two,  the  labourer 
and  capitalist ;  clearly  therefore  agriculture  has  the 
advantage."  He  assigned  at  length  what  he  thought 
was  the  philosophical  reason.  "  The  labourers  and 
labouring  cattle,  therefore,  employed  in  agriculture, 
not  only  occasion,  like  the  workmen  in  manufactures, 
the  reproduction  of  a  value  equal  to  their  own  con- 
sumption, or  to  the  capital  which  employs  them, 
together  with   its  owner's  profits ;    but  of  a   much 


i68  Economic  Studies. 


greater  value.  Over  and  above  the  capital  of  the 
farmer  and  all  its  profits,  they  regularly  occasion  the 
reproduction  of  the  rent  of  the  landlord.  This  rent 
may  be  considered  as  the  produce  of  those  powers 
of  nature,  the  use  of  which  the  landlord  lends  to  the 
farmer.  It  is  greater  or  smaller  according  to  the 
supposed  extent  of  those  powers,  or,  in  other  words, 
according  to  the  supposed  natural  or  improved 
fertility  of  the  land.  It  is  the  work  of  nature  which 
remains  after  deducting  or  compensating  everything 
which  can  be  regarded  as  the  work  of  man.  It  is  sel- 
dom less  than  a  fourth,  and  frequently  more  than  a 
third,  of  the  whole  produce.  No  equal  quantity  of  pro- 
ductive labour  employed  in  manufactures  can  ever 
occasion  so  great  a  reproduction.  In  them  nature 
does  nothing ;  man  does  all ;  and  the  reproduction 
must  always  be  in  proportion  to  the  strength  of  the 
agents  that  occasion  it.  The  capital  employed  in 
agriculture,  therefore,  not  only  puts  into  motion  a 
greater  quantity  of  productive  labour  than  any  equal 
capital  employed  in  manufactures,  but,  in  pioportion 
too  to  the  quantity  of  productive  labour  which  it 
employs,  it  adds  a  much  greater  value  to  the  annual 
produce  of  the  land  and  labour  of  the  country,  to  the 
real  wealth  and  revenue  of  its  inhabitants.  Of  all 
the  ways  in  w^hich  a  capital  can  be  employed,  it  is 
by  far  the  most  advantageous  to  the  society." 

Probably  few  passages  in  so  eminent  a  writer  on 
the  subject  for  which  he  is  eminent,  contain  so  much 
curious  falsehood.  If  nature  does  nothing  in  manu- 
factures, in  what  is  it  that  it  does  anything  ? 
"  Manufactures "    are    but    applications    of    natural 


Adam  Smith  and  our  Modern  Economy.      i6g 


forces,  just  as  agriculture  is  another  application. 
And  the  reasoning  assumes  that  the  natural  causes 
which  produce  dear  things  are  more  beneficial  to 
mankind  than  those  which  produce  cheap  things, 
though  had  Adam  Smith  seen  that  he  was  making 
such  an  assumption  he  would  have  been  the  first 
to  reject  it.  The  causes  which  produce  dear  things 
are  not  necessarily  more  beneficial  than  those  which 
produce  cheap  ones ;  they  are  only  less  plentiful. 
A  diamond  mine  is  not  more  useful  to  the  State  than 
a  coal  mine ;  probably  in  the  strictest  sense  of  the 
word  not  so  useful.  The  fact  that  a  particular 
occupation  keeps  three  classes  of  men,  while  other 
occupations  only  keep  two,  only  shows  that  there  is 
a  special  difficulty  in  getting  into  that  occupation, 
and  a  special  scarcity  in  its  opportunities ;  it  proves 
nothing  as  to  the  degree  of  good  which  it  does  for 
the  public.  And  Adam  Smith's  conclusion  is  en- 
cumbered with  the  further  absurdity  that  agriculture 
in  new  colonies  does  not  create  rent,  and  does  not 
keep  three  people,  though  of  course  it  is  just  as  good 
for  the  public  there  as  in  old  countries. 

Although,  therefore,  Adam  Smith  had  the  merit 
of  teaching  the  world  that  the  exchangeable  value 
of  commodities  is  proportioned  to  the  cost  of  their 
production,  his  analysis  of  that  cost  was  so  very 
defective  as  to  throw  that  part  of  Political  Economy 
into  great  confusion  for  many  years,  and  as  quite  to 
prevent  his  teaching  being  used  as  an  authority  upon 
it  now. 

The  causes  which  regulate  the  value  of  securities, 
whether    debts   or    shares,    Adam    Smith    did    not 


170  *  Economic  Studies. 


attempt  to  investigate  at  all ;  and  it  was  not  to  be 
expected  that  he  should  do  so,  for  such  things  were 
in  his  day  a  very  unimportant  part  of  wealth,  com- 
pared with  that  which  they  are  now.  And  if,  as  we 
have  seen,  Adam  Smith's  conception  of  "average" 
value,  and  of  the  causes  producing  it,  was  then  im- 
perfect, his  idea  of  monetary  or  market  value  was 
much  worse.  He  says :  "  The  actual  price  at  which 
any  commodity  is  commonly  sold  is  called  its  market 
price.  It  may  either  be  above,  or  below,  or  exactly 
the  same  with  its  natural  price.  The  market  price 
of  every  particular  commodity  is  regulated  by  the 
proportion  between  the  quantity  which  is  actually 
brought  to  market,  and  the  demand  of  those  who  are 
willing  to  pay  the  natural  price  of  the  commodity,  or  the 
whole  value  of  the  rent,  labour,  and  profit,  which 
must  be  paid  in  order  to  bring  it  thither.  Such 
people  may  be  called  the  effectual  demanders,  and 
their  demand  the  effectual  demand ;  since  it  may  be 
sufficient  to  effectuate  the  bringing  of  the  commodity 
to  market.  It  is  different  from  the  absolute  demand. 
A  very  poor  man  may  be  said  in  some  sense  to  have 
a  demand  for  a  coach  and  six ;  he  might  like  to  have 
it ;  but  his  demand  is  not  an  effectual  demand,  as 
the  commodity  can  never  be  brought  to  market  in 
order  to  satisfy  it." 

But  the  actual  price  at  which  a  thing  is  sold  is 
determined  not  solely  by  the  demands  of  those  who 
are  willing  to  pay  the  average  price  of  the  commodity, 
but  by  everybody's  demand  who  bids  for  it.  It  is,  as 
we  have  seen,  an  exchange  determined  by  the  quan- 
tity of  the  commodity  in  the  market  and  the  desires 


Adam  Smith  and  our  Modern  Economy.       lyi 


of  its  holders,  as  compared  with  the  quantity  of 
money  in  that  market  and  the  desires  of  its  holders ; 
it  is  a  case  of  barter  determined  by  relative  quantities 
and  relative  feelings.  And  the  phrase  "  effectual 
demand,"  if  defined  to  mean  the  demand  of  those 
willing  to  pay  cost  price,  is  misleading,  because  the 
money  offered  by  those  willing  to  pay  cost  price  is 
not  sufficient  to  be  effectual  when  articles  are  par- 
ticularly in  demand,  and  therefore  sell  for  more  than 
it  cost  to  make  them,  and  is  more  than  sufficient  to 
be  effectual  when  the  demand  for  articles  is  par- 
ticularly slack,  and  when  therefore  they  sell  for  less 
than  it  cost  to  make  them.  The  whole  idea  is  con- 
fused. 

In  other  passages,  Adam  Smith  takes  a  view  far 
better  than  in  this.  But  this  is  the  place  where  he 
ought  to  have  taken  the  best,  for  it  is  the  guiding 
paragraph  of  his  special  disquisition  upon  the  sub- 
ject. And  his  being  not  so  good  upon  it  here  as 
elsewhere  shows  that  his  elementary  conception  was 
defective  in  definiteness.  And  nothing  is  more 
natural  than  that  it  should  be  so.  Perhaps,  as  I 
have  said  before,  Adam  Smith's  mind  was  by  nature 
rather  disinclined  to  an  anxious  accuracy  in  abstract 
ideas,  and  a  century  of  critics  on  these  facts  and 
these  times  have  sharpened  our  perception  since  he 
wrote  on  them.  We  must  not  expect  from  him  the 
use  of  modern  "words  of  precision,"  any  more 
than  we  should  find  fault  with  a  marksman  of  his 
generation  for  not  using  a  rifle.  Neither  such  "  arms 
of  precision,"  nor  such  "words  of  precision,"  then 
existed.     And  there  was  then  little  encouragement 


172  Economic  Studies. 


to  think  out  the  subject.  Adam  Smith  evidently 
hurries  over  the  abstract  part  of  it,  because  he  thinks 
his  readers  will  not  attend  to  it.  Even  now  a  writer, 
who  wishes  to  be  read  beyond  a  very  narrow  circle, 
must  be  careful  not  to  be  too  elaborate.  And  in  the 
last  century  the  case  was  certainly  far  worse.  Many 
great  writers — Montesquieu  and  Hume  especially — 
would  have  written  far  more  instructively,  and  as  we 
should  now  think,  far  better,  if  they  could  have  relied 
on  any  careful  attention  from  their  readers.  They 
evidently  thought  that  their  writings  would  be 
principally  read  by  persons  who  would  cease  to  read 
as  soon  as  they  became  dull.  Now-a-days  the 
diffusion  of  physical  science — even  of  popular  physi- 
cal science — has  partly  taught  us  that  much  truth  is 
dull  and  complex,  and  that  the  most  interesting 
parts  of  truth  can  only  be  understood  by  those  who 
have  mastered  that  dull  and  complex  part.  But 
even  now  we  do  not  remember  this  half  enough. 

After  these  specimens,  it  would  evidently  be  tedious 
to  criticise  The  Wealth  of  Nations  as  if  it  were  a 
treatise  of  modern  Political  Economy.  We  have 
given  some  account  of  what  would  be  its  answer  to 
the  first  question  of  that  science,  "  What  makes  all 
things  exchange  for  more  or  less  of  other  things  ?  " 
And  we  see  from  it  what  the  answer  to  other  similar 
questions  would  be  like.  Nothing  could  be  more 
unjust  to  a  great  writer  than  to  judge  of  him  by  a 
standard  which  he  did  not  expect,  and  to  blame  his 
best  book  for  not  being  what  he  never  thought  of 
making  it,  especially  when,  except  for  him,  we  should 
never  have  imagined  the  standard,  or  conceived  the 


Adam  Smith  and  our  Modern  Economy.         173 

possibility  of  the  book  being  that  which  we  now 
blame  it  for  not  being.  We  might  as  well  expect 
that  the  first  cultivators  of  a  country  should  make 
the  best  permanent  road,  as  that  the  first  pro- 
pounders  of  great  conceptions  should  shape  them 
into  the  finished  form  most  useful  to  posterity. 

The  ways  really  to  appreciate  Adam  Smith  are 
two.  First, — You  should  form  a  clear  notion  of  the 
state  of  the  received  Political  Economy  of  the  world 
at  the  time  he  wrote.  The  last  treatise  on  the  sub- 
ject published  in  England  before  The  Wealth  of 
Nations,  was  The  Principles  of  Political  Economy,  by 
Sir  James  Steuart.  The  author  was  a  man  of  culture 
and  travel,  acquainted  with  a  great  variety  of  eco- 
nomic facts,  and  conversant  with  what  had  been 
written  before  upon  the  subject.  He  was  a  man  of 
considerable  natural  ability,  respected  and  consulted 
in  his  time,  and  his  book  is  still  worth  looking  over, 
for  it  contains  many  facts  and  reasonings  which  are 
curious.  And  this  is  the  sort  of  thing  he  writes. 
Much  foreign  trade  he  considers  mischievous.  He 
propounds  a  plan — a  foreign  trade  that  is  really 
desirable  for  a  nation  founded  on  the  three  following 
"easy  principles  ". 

"  The  first, — That  in  a  country  entirely  taken  up 
with  the  object  of  foreign  trade,  no  competition 
should  be  allowed  to  come  from  abroad  for  articles 
of  the  first  necessity,  and  principally  for  food,  so  as 
to  raise  prices  beyond  a  certain  standard. 

"The  second, — That  no  domestic  competition 
should  be  encouraged  upon  articles  of  superfluity, 
so  as  to  raise  prices  beyond  a  certain  standard. 


174  Economic  Studies. 


"  The  third, — That  when  these  standards  cannot 
be  preserved,  and  that,  from  natural  causes,  prices 
get  above  them,  public  money  must  be  thrown  into 
the  scale  to  bring  prices  to  the  level  of  those  of  ex- 
portation. 

"  The  greater  the  extent  of  foreign  trade  in  any 
nation  is,  the  lower  these  standards  must  be  kept ; 
the  less  the  extent  of  it  is,  the  higher  they  may  be 
allowed  to  rise."  ^ 

And  taking  the  subject  more  practically,  he  says : 
"  It  is  a  general  maxim  to  discourage  the  importa- 
tion of  work,  and  to  encourage  the  exportation  of  it," 
and  upon  that  footing  he  asks  and  discusses :  "  What 
is  the  proper  method  to  put  a  stop  to  a  foreign  trade 
in  manufactures  when  the  balance  of  it  turns  against 
a  nation  ?  "  This  is  the  kind  of  authoritative 
doctrine  which  ruled  in  Adam  Smith's  time,  and 
from  which  he  delivered  us. 

The  second  way  is  to  take  up  Adam  Smith  him- 
self and  read  him.  There  are  scarcely  five  consecu- 
tive pages  in  The  Wealth  of  Nations,  which  do  not 
contain  some  sound  and  solid  observation  important 
in  practice  and  replete  with  common-sense.  The 
most  experienced  men  of  business  would  have  been 
proud  of  such  a  fund  of  just  maxims  fresh  from  the 
life,  and  it  is  wonderful  that  they  should  have  oc- 
curred to  an  absent  student,  apparently  buried  in 
books  and  busy  with  abstractions.  Most  of  such 
students,  so  far  from  being  able  to  make  such  re- 
marks, would   not    comprehend    their  value — would 

^Principles  of  Political  Econoniy,  by  Sir  James  Steuart,  vol- 
i-,  p.  358. 


Adam  Smith  and  our  Modern  Economy.       175 

acknowledge  that  they  could  not  see  much  in  them, 
if  they  were  elaborately  explained  to  them.  Adam 
Smith  himself  probably  did  not  know  their  exceeding 
merit,  and  preferred  more  learned  parts  of  his 
writings,  which  are  now  obsolete,  and  more  refined 
parts,  which  are  now  seen  to  have  little  value.  Lord 
Bacon  says  of  some  one  that  he  was  "like  Saul, 
who  went  in  search  of  his  father's  asses  and  found  a 
kingdom "  ;  and  this  is  exactly  what  happened  to 
Adam  Smith.  He  was  engaged  in  a  scheme  of  vast 
research,  far  surpassing  the  means  at  his  disposal, 
and  too  good  for  any  single  man.  In  the  course 
of  that  great  pursuit,  and  as  a  small  part  of  it,  he 
came  upon  the  "  Wealth  of  Nations,"  for  dealing  with 
which  his  powers  and  his  opportunities  peculiarly 
fitted  him,  and  on  that  he  wrote  a  book,  which  has 
itself  deeply  influenced  thought  and  policy,  and 
which  has  been  the  beginning  of  a  new  science.  He 
has  obtained  great  fame,  though  it  was  not  that 
fame  which  was  the  dream  of  his  life,  for — 

What  was  before  us  we  know  not, 
And  we  know  not  what  shall  succeed.^ 

^  Matthew  Arnold. 


176 


MALTHUS. 

The  next  great  advance  in  Political  Economy  was 
made  almost  in  as  unlikely  a  manner.  In  the  middle 
of  the  last  century  there  lived  in  the  south  of  England 
a  certain  Mr.  David  Malthus,  who  was  a  friend  and 
correspondent  of  Rousseau,  and  one  of  his  executors. 
This  gentleman  had  adopted  all  Rousseau's  ideas  of 
the  perfectibility  of  man,  and  of  the  speed  with 
which  he  would  improve  if  he  were  only  left  to  him- 
self, and  set  free  from  the  chains  of  ancient  custom 
The  air  of  that  time  was  full  of  such  ideas,  and 
many  otherwise  quiet  and  rational  persons  were 
excited  and  enthusiastic  about  them.  Mr.  David 
Malthus  had  a  clever  son,  Robert,  whom  he  educated 
with  great  care,  and  to  whom,  doubtless,  in  season 
and  out  of  season,  he  communicated  his  favourite 
ideas.  At  any  rate,  Robert  grew  up  with  a  proper 
antipathy  to  them.  The  instinctive  reaction  of 
child  against  parent,  which  more  than  almost  any- 
thing keeps  men  moving,  and  prevents  "  one  good 
custom"  from  "corrupting  the  world,"  has  seldom 
had  a  better  example.  "  Train  up  a  child  in  the 
way  he  should  go,"  a  cynic  has  observed,  "and  then 
you  may  feel  safe  that  he  will  not  walk  in  it."  Let 
a  child  hear  much  from  infancy  of  nice  dreams  and 
pleasing  visions,  and  to  the  best  of  your  ability  you 
will  have  prepared  him  for  prosaic  carefulness  and  a 
dismal  rationalism. 


Malthus.  177 

The  Essay  on  Population,  says  Mr.  Malthus,. 
"  which  I  published  in  1798,  was  suggested,  as  is 
stated  in  the  preface,  by  a  paper  in  Mr.  Godwin's 
Enquirer;''  and  there  is  a  curious  story  about  it. 
Mr.  Godwin  was  a  disciple  of  Rousseau,  and  had 
drawn  up  a  plan  of  village  perfection,  in  which  "  every 
rood  was  to  maintain  "  its  man,  and  in  which  man- 
kind were  to  be  happy  and  at  ease,  without  the 
annoying  restraints  of  property  and  marriage.  Such 
"Elysiums"  have  been  sketched  in  all  ages,  and 
here  is  nothing  remarkable  about  them  ;  but  Mr. 
Malthus's  reply  was  very  remarkable.  "  You  may," 
he  said,  ''imagine  this  perfect  picture  for  a  little 
while,  but  it  will  not  last.  It  cannot  last.  Nature 
is  against  it.  She  has  a  principle — that  of  popu- 
lation— which  is  sure  to  destroy  it.  Mankind  always, 
by  her  arrangements,  increase  as  fast  as  they  can ; 
misery  checks  their  increase,  and  vice  checks  it,  but 
nothing  else.  A  perfectly  happy  and  virtuous  com- 
munity, by  physical  law,  is  constrained  to  increase 
very  rapidly ;  if  you  look  into  the  fact  you  will  find 
that  it  will  double  every  twenty-five  years,  but  there 
can  be  no  similar  increase  in  their  food.  The  best 
lands  are  taken  up  first,  then  the  next  best,  then  the 
inferior,  at  last  the  worst ;  at  each  stage  the  amount 
of  food  produced  is  less  than  before.  By  nature 
human  food  increases  in  a  slow  arithmetical  ratio ; 
man  himself  increases  in  a  quick  geometrical  ratio, 
unless  want  and  vice  stop  him,  so  that  if  you  make 
him  happy  in  a  village  community  for  a  moment,  he 
will  soon  multiply  so  that  he  shall  cease  to  be  happy  ; 
there  is  nothing  to  stop  him ;  he  will  ere  long  reach 

12 


178  Economic  Studies. 


the  inevitable  limit  where  want  and  wickedness  begin 
to  keep  him  down." 

The  world  rather  eagerly  read  his  doctrine,  for  the 
reaction  against  dreams  and  visions  was  strong  in 
many  minds.  The  event  of  the  French  Revolution 
had  upset  all  calculation,  broken  up  all  pleasing 
visions,  and  disheartened  half,  or,  indeed,  much 
more  than  half,  mankind.  Mr.  Malthus  was  as  much 
the  mouthpiece  of  his  generation  in  exposing  Utopias, 
as  his  father  had  been  in  accepting  them.  The 
Essay  on  Population,  in  its  first  edition,  was  read 
with  eager  avidity,  and  its  doctrines  seem  to  have 
been  much  believed. 

Still,  when  examined,  the  tenets  seemed  startling, 
and  what  made  them  even  more  surprising  was  that 
their  propounder,  Mr.  Malthus,  was  a  clergyman. 
People  objected,  "Can  this  really  be  so?  Is  it  con- 
sistent with  religion  ?  Can  we  believe  that  inevitably 
man  is  yoked  to  sin  and  misery  ?  That  even  if  you 
make  him  good,  and  if  goodness  makes  him  happy, 
the  structure  of  earth  and  nature  is  such  as  inevitably 
in  a  few  years  to  make  him  miserable  again  ?  How 
is  this  possible  under  a  benevolent  Creator  ?  How 
can  it  be  made  to  accord  with  revelation  ?  "  Such 
objections  were  difficult  to  answer,  especially  as  Mr. 
Malthus  was  a  simple  candid  man,  and  they  seem  to 
have  had  much  effect  in  changing  his  views.  At 
least,  in  the  preface  to  the  second  edition,  he  tells 
us :  "  Throughout  the  whole  of  the  present  work,  I 
have  so  far  differed  from  the  former,  as  to  suppose 
the  action  of  another  check  to  population,  which  does 
not  come  under  the  head  either  of  vice  or  misery''. 


Malthus.  tyg 

This  is  the  celebrated  principle  of  "  self-restraint, 
moral  or  prudential ".  And  he  goes  on  to  say  that 
he  has  endeavoured  to  soften  some  of  the  harshest 
conclusions  of  the  first  essay.  But  he  does  not  seem 
to  see  that  he  has  cut  away  the  ground  of  his  whole 
^  argument.  If  there  be  this  principle  of  virtuous 
^  self-restraint,  he  no  longer  answers  Godwin  ;  he  no 
longer  destroys  the  dreams  of  perfectibility.  If  it  be 
possible  for  a  perfectly  virtuous  community  to  limit 
their  numbers,  they  will  perform  that  duty  just  as 
they  perform  all  others ;  there  is  no  infallible  prin- 
ciple that  will  break  up  the  village  community;  it 
can  adjust  its  numbers  to  its  food,  and  may  last 
for  ever.  In  its  first  form  the  Essay  on  Popula- 
tion was  conclusive  as  an  argument,  only  it  was 
based  on  untrue  facts  ;  in  its  second  form  it  was 
based  on  true  facts,  but  it  was  inconclusive  as  an 
argument. 

From  this  unlucky  beginning  the  established 
doctrine  in  Political  Economy  of  "  Population"  is  to  be 
dated.  And  as  was  not  unnatural,  so  odd  a  com- 
mencement was  unfavourable  to  its  comprehension. 
From  the  mode  in  which  he  first  regarded  the  sub- 
ject, it  was  natural  that  Mr.  Malthus  should  think 
more  of  the  painful  aspects  of  the  subject  than  of  the 
opposite  ones.  At  first  there  were  no  cheerful 
aspects ;  the  doctrine  was  an  apparatus  for  destroy- 
ing cheerfulness ;  in  its  second  and  truer  form  it  is 
far  less  painful,  though  like  most  great  truths  about 
the  world  (especially  economic  ones,  which  have  so 
much  to  do  with  labour  and  toil),  it  has  its  painful 
side.       But     Mr.    Malthus     first    put     the    painful 


I  So  Economic  Studies. 

side  alone  forward,  fixed  the  public  mind   upon  it, 
and  for  many  years  it  could  see  no  other. 

There  is  much  in  the  theory  of  population  which 
it  would  require  a  large  book  to  discuss,  and  I  am 
far  from  pretending  that  I  could  write  that  book. 
Many  most  difficult  questions  of  morals,  and  many 
others  of  physiology,  must  be  treated  of,  and  it 
is  especially  hard  to  discuss  such  questions  virginibus 
puerisque,  as  almost  all  questions  are  now  discussed. 
Some  parts  of  it  could  scarcely  be  managed,  except 
under  the  decent  veil  of  a  dead  language.  The  con- 
ditions of  marriage  form  only  part  of  that  subject, 
and  a  great  deal  would  have  to  be  written  on  that 
part  in  its  relations  to  the  actual  past,  and  to  the 
possible  future.  But  what  is  necessary  for  abstract 
Political  Economy  is  much  easier.  As  has  been 
previously  explained,  the  peculiarity  of  this  science 
is  that  it  abstracts,  that  is,  it  seizes  upon  and  alone 
considers  the  principal  peculiarities  of  existing  man 
as  we  find  him  in  the  principal  commercial  nations. 
It  does  not  profess  to  be  accurately  complete  as  to 
those  nations,  even  as  they  are  now,  still  less  as 
they  once  were,  or  as  they  may  hereafter  be  ;  and 
still  less  again  does  it  pretend  to  be  true  of  other 
nations,  in  ages  of  a  different  character,  cast  in  a 
different  mould,  and  occupied  with  different  ideas. 
Human  nature  is  so  various  that  we  cannot  treat  of 
it  at  once  briefly  and  fully ;  we  can  only  reason  on 
short  propositions,  and,  therefore,  we  must  cut  the 
subject  up  into  distinct  portions,  each  of  which 
can  be  conceived  of  by  itself  and  heard  out  by  itself 
And    no    part    of    human    nature  is    more    infinite 


Malthas.  i8i 

than  the  relation  between  the  sexes  and  its  con- 
sequences. 

Mr.  Malthus  had  no  idea  of  looking  at  the  subject 
in  this  way.  He  thought  he  was  dealing  with  all 
nations  and  all  ages.  In  its  original  form  the 
Essay  propounded  a  universal  principle,  destruc- 
tive of  golden  visions;  in  its  later  forms  he  deals, 
first,  with  principles  of  population  in  the  most  bar- 
barous ages,  and  then  with  them  in  every  variety 
of  society  which  he  knew  of — nomad  or  stationary, 
commercial  or  agricultural ;  and  there  is  much  in 
his  discussion  of  the  savage  society,  which  is  still 
worth  reading,  and  which  was  much  before  his  time. 
His  mind  was  by  nature  indisposed  for,  and  unfit  for, 
abstractions;  indeed,  if  I  may  say  so  with  reverence, 
he  always  seems  to  me  but  a  poor  hand  at  a  dry 
argument.  Like  Adam  Smith,  he  had  no  idea  that 
he  was  founding  an  abstract  science  ;  he  thought  he 
was  dealing  wholly  with  the  concrete  world,  but  it 
so  happened  that  his  idea  of  the  concrete  world 
coincided  with  the  most  convenient  abstraction 
that  can  be  made  from  it,  and  so  he  became, 
in  spite  of  himself,  the  founder  of  an  abstract 
science. 

The  assumed  laws  of  population  in  abstract  Politi- 
cal Economy  are  these  : — 

First, — That  population  would  soon  outstrip  the 
means  of  feeding  it,  if  it  were  not  kept  down  by  vice, 
misery,  or  self-restraint. 

Secondly, — That  in  a  state  of  society  where  self- 
restraint  does  not  act  at  all,  or  only  acts  so  little 
that  we  need  not  think  of  it,  population  will  augment 


i82  Economic  Studies. 


till  the  poorest  class  of  the  community  have  only  just 
enough  to  support  life. 

Thirdly, — That  in  a  community  where  self-restraint 
acts  effectually,  each  class  of  the  community  will 
augment  till  it  reaches  the  point  at  which  it  begins  to 
exercise  that  restraint. 

In  the  second  case  (which  was  all  that  Malthus 
thought  of  in  his  first  edition),  the  population  in- 
creases till  it  reaches  a  physical  minimum  of  sub- 
sistence— one  that  is  set  by  natural  causes ;  in  the 
other  it  increases  till  it  reaches  a  moral  minimum  of 
subsistence — that  is,  one  set  by  human  choice.  And 
it  follows  that  in  improving  communities  this  moral 
minimum  is  commonly  rising,  for  in  most  com- 
munities more  self-restraint  of  this  sort  is  desirable, 
and  as  people  improve  they  mostly  are  more  inclined 
to  exercise  it.  The  physical  minimum  must  be  a 
fixed  minimum  ;  the  moral  may  be,  and  ordinarily  is, 
a  moving  minimum.  A  Political  Economist  does  not 
imagine  (as  I  have  previously  explained)  that  vice, 
misery,  and  self-restraint  are  the  only  causes  which 
affect  the  rate  of  increase  of  population.  He  well 
knows  that  many  others  act  on  it.  All  he  says  is, 
that  in  the  principal  commercial  communities  of  the 
world  these  causes  are  now  in  most  powerful  opera- 
tion, though  they  are  retarded  or  helped  by  others ; 
in  a  word,  that  these  selected  causes  will  in  such 
communities  produce  the  specified  results,  in  more  or 
less  time,  though  there  are  other  causes  which  aid 
in  settling  how  long  or  how  short  that  time  is  to 
be. 

P"or  example,  it  might  well  be  (though  I  do  not 


Malthus.  183 

know  that  it  has  been  proved)  that  some  races  of  men 
from  inherent  organisation  tend  to  augment  faster 
than  other  races.  The  causes  which  divide  men 
into  races  are  so  many,  so  hidden,  and  produce  so 
many  effects,  that  it  would  not  be  strange  if  they  had 
this  effect  among  others.  Perhaps  there  would  be 
more  a  priori  likelihood  that  they  would  have  such 
an  effect  as  this  than  that  they  would  produce  some 
actual  effects  which  are  quite  certain.  There  is 
much  evidence  that  different  climates  affect  differ- 
ently the  sexual  desires  ;  some  aggravating  them  and 
some  calming  them.  And  it  would  seem  likely  that 
those  races  which  had  in  this  respect  for  ages  been 
exposed  to  intensifying  influences,  would  augment 
more  rapidly  than  those  which  had  been  exposed 
to  mitigating  ones.  Our  knowledge  of  race-making 
causes  is  still  most  imperfect,  and  we  can  never 
trace  race  effects  separately ;  they  are  always  com- 
bined with  the  effects  of  many  other  causes.  In  this 
case  the  confusion  is  peculiarly  complex,  for  rules  of 
morality — arising  in  unknown  circumstances,  and 
inherited  for  untold  ages — so  retard  or  quicken  the 
growth  of  population  that  it  is  impossible  to  isolate 
the  purely  physiological  phenomenon.  Still  the 
principles  above  laid  down  afford  all  possible  room 
for  it ;  they  will  have  their  usual  action,  though 
morality  will  have  a  concurrent  action. 

Again,  we  may  quite  believe  that  the  nervous 
conditions  which  luxury  engenders  are  less  favour- 
able to  the  proliticness  of  population  than  simpler 
conditions.  On  this  point,  and  on  this  point  only, 
of  the  theory  of  population — Adam  Smith   had   re- 


184  Economic  Studies. 


markable  and  sound  views.  "  A  half-starved  High- 
land woman,"  he  tells  us,  **  frequently  bears  more 
than  twenty  children,  while  a  pampered  fine  lady  is 
often  incapable  of  bearing  any,  and  is  generally 
exhausted  by  two  or  three.  Barrenness,  so  frequent 
among  women  of  fashion,  is  very  rare  among  those 
of  inferior  station."  Probably  of  all  causes  which 
regulate  the  pace  of  population,  the  nervous  state  of 
the  woman  is  the  most  important,  and  it  seems  to 
have  a  kind  of  cyclical  course  as  society  advances. 
There  is  much  reason  to  think  that  in  the  earliest 
state  in  which  we  know  men  to  have  lived — the  state 
of  the  old  slave  age  and  the  present  savages — the 
hard  labour  and  insufficient  food  of  the  women  tend 
very  much  to  keep  down  the  increase  of  numbers. 
At  a  later  period  the  improvement  of  food,  better 
shelter,  diminution  of  work  during  pregnancy,  bring 
the  bearing  power  of  women  up  to  its  maximum. 
The  Highland  woman  of  Adam  Smith  probably  was 
able  to  bring  into  the  world  as  many  children,  and, 
physically  at  least,  as  strong  children,  as  any  one 
who  ever  lived.  After  that,  not  only  the  luxury  of 
which  he  speaks,  but  education  and  the  habit  of 
using  the  mind,  tend  almost  certainly  to  diminish 
the  producing  power.  There  is  only  a  certain 
quantity  of  force  in  the  female  frame,  and  if  that 
force  is  invested,  so  to  say,  in  one  way,  it  cannot  be 
used  in  another. 

The  same  force  acts,  no  doubt,  on  man,  but  prob- 
ably differently.  The  use  of  the  mind  in  some  ways 
certainly  does  not  have  much,  if  any,  effect  on  the 
power  of  increasing  the  race.     The  English  judges 


Mai  thus.  185 

whose  children  Mr.  Galton  counted,  showed  very 
considerable  capacity  of  this  sort,  and  they  worked 
in  their  way  as  hard  as  many  people  ever  have  or 
will.  But  for  the  most  part  they  do  their  work  with 
a  joyous  swing  and  impetus  which  show  that  it  does 
not  tell  upon  the  nerves.  But  anxiety,  as  has  been 
said,  does  so  tell,  and  we  have  seen  that  there  is 
reason  to  believe  that  it  much  tends  to  slacken  the 
growth  of  population ;  and,  probably,  any  of  the 
higher  exercises  of  the  mind,  which  cause,  as  they 
all  do,  obscure  and  subtle  pain,  have  a  similar  effect. 
But  these  are  problems  for  the  future.  No  one  can 
say  that  they  are  solved  as  yet ;  indeed,  we  are  only 
beginning  to  try  to  solve  them.  Some  have  been 
sanguine  enough  to  fancy  that  the  accumulation  of 
them  may  in  distant  ages  make  a  stationary  state 
possible,  and  make  it  pleasant.  But  with  this 
Political  Economy  has  nothing  to  do.  It  deals  with 
men  here  and  now ;  it  takes  certain  parts  of  their 
nature  which  are  indisputable,  and  which  are  im- 
portant, and  considers  how  these  would  operate  by 
themselves.  Questions  as  to  the  ultimate  effects  of 
other  agencies,  physiological  or  mental,  it  leaves  to 
other  sciences  and  to  futurity. 

In  the  same  way,  then,  Political  Economy  cannot 
by  itself  pretend  to  solve  the  many  new  problems 
which  the  sanitary  condition  of  great  cities  suggests 
in  this  age  of  them.  There  can  be  little  doubt  that 
these  great  accumulations  of  human  beings  have  at 
least  three  effects.  First,  Mr.  Galton  holds  that  they 
diminish  in  some  unknown  degree  the  number  of 
births.     "  Again,  there  is  a  constant  tendency  of  the 


i86  Economic  Studies. 


best  men  in  the  country  to  settle  in  the  great  cities, 
where  marriages  are  less  prolific  and  children  are 
less  likely  to  live.  Owing  to  these  several  causes, 
there  is  a  steady  check  in  an  old  civilisation  upon 
the  fertility  of  the  abler  classes  ;  the  improvident  and 
unambitious  are  those  who  chiefly  keep  up  the  breed. 
So  the  race  gradually  deteriorates,  becoming  in  each 
successive  generation  less  fitted  for  a  high  civilisation, 
although  it  retains  the  external  appearances  of  one, 
until  the  time  comes  when  the  whole  political  and 
social  fabric  caves  in,  and  a  greater  or  less  relapse 
to  barbarism  takes  place,  during  the  reign  of  which 
the  race  is  perhaps  able  to  recover  its  tone."  And 
these  consequences  seem  to  Mr.  Galton  purely  evil. 
But  they  do  not  seem  so  to  me.  No  doubt  it  is  an 
evil  that  the  accumulation  of  men  in  cities  weakens 
the  frame,  and  that  they  have  not  the  same  energy 
or  health  as  those  in  the  country.  Every  one  must 
regret  this  decline  of  power.  But  when  power  has 
declined  in  a  certain  race,  it  is  better  that  that  race 
should  not  increase  as  fast  as  others.  We  had 
better  breed  from  hardy  than  from  weakened  speci- 
mens. The  diminished  growth  of  urban  populations 
seems  to  be  Nature's  remedy  for  the  diminution  in 
their  strength.  Secondly,  great  towns  indisputably 
encourage  drunkenness.  The  bad  state  of  the  atmo- 
sphere there  certainly  inclines  men  more  to  drink 
than  the  better  air  of  the  country.  And  this  is,  no 
doubt,  a  great  evil.  But  we  may  doubt  if  it  is  an 
evil  without  compensation.  The  persons  most  in- 
clined to  drunkenness  are  generally  persons  of  some 
nervous  taint  or  weakness  which  they  often  inherited 


Malthus.  187 

themselves,  and  which  they  might  not  improbably 
transmit  to  their  children.  I  do  not,  of  course,  mean 
that  this  inherent  weakness  is  irresistible.  No  doubt 
the  mass  of  these  people  can,  at  first  at  least,  help 
drinking  very  well.  The  heritable  taint  amounts 
only  to  an  increased  liability  to  this  temptation. 
But  this  is  quite  reason  enough  to  wish  that  it  should 
not  be  inherited.  Great  cities  seem  to  have  this 
special  function  in  the  world,  that  they  bring  out 
this  taint  in  the  worst  specimens.  Not  only  do  such 
persons  suffer  as  usual  from  the  general  decline  in 
the  multiplying  power  of  city  populations,  but  they 
also  suffer  in  a  way  peculiar  to  themselves.  One  of 
the  effects  of  a  drunken  habit  is  to  diminish  this 
kind  of  power,  as  well  as,  and  perhaps  more  than, 
most  others.  Thirdly,  great  cities  collect  together 
a  great  criminal  population,  and  make  them  sterile  ; 
and  so  far  as  crime  is  connected  with  a  low  type  of 
nervous  organisation,  as  it  is  very  often,  this  sterility 
is  a  great  gain.  Society  gets  rid  of  these  over- 
tempted  persons,  whose  peculiar  defects  are  a  dan- 
ger to  others  as  well  as  to  themselves.  Great  cities 
must  always  be  in  their  worst  aspects  painful  spec- 
tacles, but  this  painfulness  is  somewhat  relieved 
when  we  see  that  we  can  regard  them  as  a  huge 
cleansing  machinery,  which,  no  doubt,  shows  us  a 
great  deal  that  is  detestable,  but  also  takes  away 
much  of  it,  and  prevents  more  coming,  not  only  in 
that  place  but  in  others. 

Nor  has  Political  Economy  any  concern  with  the 
other  purging  means,  which  in  a  subtle  way  Nature 
seems  to  use  all  through  civilised  society.     It  is  said 


l88  Economic  Studies. 


that  man  is  the  only  animal  of  whose  breed  no 
care  is  taken.  But  Nature  has  not  forgotten  to  take 
much  care  of  it.  Every  one  who  watches  society  must 
have  seen  many  instances  in  which  defective  fami- 
lies have  died  out,  because  they  were  defective.  The 
men  being  weak  failed  to  earn  their  living,  and, 
therefore,  could  not  marry,  and  the  girls  wanting 
from  the  same  cause  life  and  vigour  did  not  find 
husbands,  and  so  the  race  died  away.  And  this 
cause  works  not  only  in  families  weak  as  a  whole, 
but  in  the  weak  members  of  strong  families.  All 
through  society  there  is  a  constant  tendency  in  civil- 
ised life  to  slacken  the  pace  of  population  by  weed- 
ing away  those  weaker  and  less  valuable. 

There  seem  to  be  curious  processes  of  Nature  also 
at  the  other  end  of  the  scale  of  cultivation.  The 
process  by  which  so  many  savage  races  die  out  before 
civilised  man,  is  certainly  not  as  yet  completely 
explained.  Hard  work,  which  civilised  man  brings, 
and  which  most  savages  cannot  bear,  accounts  for 
some  of  it ;  alcohol,  "  the  fire-water,"  as  savages 
call  it,  accounts  for  more.  But  there  seems  to  be  a 
residue  still  unexplained.  The  most  plausible  theory 
says  that  this  is  due  to  two  causes ;  and  first,  to  the 
inability  of  savage  nations  to  bear  the  diseases  to 
W'hich  the  hardened  frame  of  civilised  men  is  inured. 
For  ages,  in  the  contested  parts  of  the  world  which 
civilised  man  inhabits,  the  stronger  race  has  con- 
quered and  supplanted  the  weaker,  and  the  result 
is  a  strong  animal  equal  to  many  difficulties,  and 
able  among  other  things  to  survive  strong  diseases. 
But  in  the  out-of-the-way  places  which  savages  in- 


Malthus.  i8g 

habit  there  has  been  no  such  incessant  conflict,  and 
in  consequence  there  is  no  such  strong  animal.  The 
weaker  savage  succumbs  to  diseases  which  the 
seasoned  white  man  easily  bears  Indeed,  the  way 
in  which  savages  waste  away  before  "  alcohol  "  is 
but  a  case  of  this ;  they  cannot  bear,  as  white  men 
can,  the  diseases  which  it  generates.  And  the  second 
cause  which  co-operates  with  this  is  a  certain  dis- 
heartened tendency  of  mind  which  somehow  tells  on 
the  nerves  and  which  is  analogous  to  the  way  in 
which  wild  animals  die  out  when  caught  and  con- 
fined. A  certain  life  and  spirit  seem  as  essential 
to  keep  men  in  good  numbers  as  in  good  health. 

Different  kinds  of  food  may,  too,  for  ought  we 
know,  have  an  effect  not  yet  understood  on  man's 
power  to  increase  his  numbers.  The  potato  was  at 
one  time  fancied — erroneously,  probably — to  contain 
a  particular  stimulus  of  this  sort.  But  though  this 
instance  may  have  been  a  mistake,  the  conception  is 
possible.  We  must  not  always  say  that  the  more 
nutritious  food  will  tend  universally  to  produce  the 
more  people,  though,  no  doubt,  it  usually  does  so. 
It  may  even  sometimes  have  a  contrary  effect ;  it 
may  run  to  quality  rather  than  to  quantity ;  it 
may  make  fewer  strong  people,  instead  of  more  weak 
ones. 

I  set  out  these  considerations  at  length  because  it 
is  most  important  that  there  should  be  no  disunion 
between  Political  Economy  and  Physiology,  or 
between  it  and  the  more  complex  forms  of  social 
science.  No  Political  Economist  has  the  slightest 
reason  to  depreciate  the  causes  which  act  on  popula- 


I  go  Economic  Studies. 


tion  of  which  his  science  takes  no  cognisance.  On 
the  contrary,  he  has  the  greatest  reason  for  taking 
an  interest  in  them.  They  supplement  what  he  dis- 
cusses ;  reahty  is  composed  of  the  influences  treated 
of  in  his  science,  plus  these  influences,  and  of  course 
he  wishes  to  compare  his  work  with  fact. 

We  must  be  careful  to  see  what  these  principles 
themselves  mean,  for  they  are  often  mistaken.  Even 
apart  from  Physiology,  they  do  not  say  that  an  in- 
crease in  the  comfort  of  a  people  necessarily  tends  to 
augment  their  numbers.  It  does  so  in  two  cases 
only.  The  first  case  is  when  the  people  are  at 
the  "physical  minimum,"  with  just  enough  to  sup- 
port life,  and  do  not  exercise  self-restraint.  Here  the 
moment  there  is  more  food  there  will  be  more  num- 
bers. Such  people  will  always  multiply,  just  as  the 
ryots  in  Bengal,  in  a  somewhat  similar  state  of  things, 
are  multiplying.  The  second  case  is  when  the  people 
are  at  the  "  moral  minimum,"  with  just  what  will  sup- 
port the  existing  numbers  in  the  sort  of  life  they  think 
proper — be  it  high  or  low — such  numbers  being  kept 
down  by  self-restraint,  and  when  the  people  do  not 
change  their  standard.  Then,  undoubtedly,  morecom- 
fort  will  be  turned  into  more  children,  and  in  a  little 
while  the  new  state  of  things  will  produce  no  more  com- 
fort to  each  person  than  the  old  one — only  there  will 
be  more  persons  to  enjoy  it.  But  there  is  no  sort  of 
necessity  in  this ;  as  has  been  explained,  the  "  moral 
minimum  "  is  very  movable  ;  the  people  may  change 
their  standard,  and  in  that  case  more  comfort  will 
not  produce  more  persons.  There  will  only  be  as 
many   as   there   would    have    been    before,   and   the 


Malthus.  191 

average  of  these  will  have  a  better  life.  Whether  a 
people  take  one  course  or  the  other,  will  depend  on 
this  sort  of  change,  and  on  its  relation  to  the  sort  of 
civilisation  enjoyed  by  the  people.  I  doubt  if  any 
general  formula  can  be  found  for  it.  Some  writers 
have  said  that  a  great  sudden  change  which  elevates 
a  whole  generation,  is  more  likely  to  raise  the 
population  standard  than  a  series  of  successive  small 
changes.  But  as  far  as  I  can  judge,  more  depends 
on  the  previous  preparation  of  the  people  than  on  its 
absolute  amount  ;  a  really  thrifty  people  used  to  self- 
denial  will  profit  exceedingly  by  a  series  of  small 
improvements;  they  will  not  "run  to  numbers," 
they  will  augment  in  happiness.  And  an  easy-going 
enjoying  nation  will  mostly  not  be  much  the  better 
for  any  boon  of  plenty,  however  great  or  sudden ; 
they  will  live  at  the  same  average,  but  the  average 
will  not  be  raised. 

Now  that  we  see  the  extreme  delicacy  of  the 
assumptions  as  to  population  on  which  abstract 
Political  Economy  is  based,  we  shall  not  be  surprised 
at  finding  that  Mr.  Malthus  did  not  apprehend  them 
as  they  really  are.  As  I  have  said,  he  did  not  in  the 
least  know  that  he  was  aiding  in  the  foundation  of 
an  abstract  science.  He  thought  that  he  was  deal- 
ing with  real  men  and  that  the  principles  which  he 
expounded  were  all  those  which  affected  his  subject. 
Indeed,  the  best  part  of  his  book  is  an  account, 
which  must  have  cost  great  labour  at  that  time,  of 
the  rate  at  which  population  had  augmented,  and 
was  augmenting,  in  various  countries,  and  the 
causes  which   influenced  that   rate.     And  the   best 


192  Economic  Studies. 


part  of  this  is  that  which  relates  to  the  savage 
state,  for  even  now  when  that  state  has  been  so 
accurately  studied,  it  is  worth  while  to  glance  over 
what  Malthus  wrote  on  it,  more  than  fifty  years  ago. 
That  his  analysis  of  population  causes  in  other 
countries  should  be  most  incomplete  was  a  matter 
of  course ;  even  now  we  are  in  the  dark  on  much 
of  this  subject.  But  how  incomplete  it  was  will 
sufficiently  appear  from  a  single  fact.  Though  he 
treats  elaborately  of  Norway  and  of  Switzerland, 
he  has  no  idea  that  peasant  properties  have  a  tend- 
ency to  check  population  He  discusses  the  subject 
as  if  there  were  no  difference  in  this  respect  between 
a  people  which  owns  the  soil  and  one  which  lives  by 
wages.  And  therefore  many  of  the  disquisitions  in 
which  he  indulges  are  wholly  thrown  away. 

And  Mr.  Malthus,  as  was  natural,  never  cleared 
his  mind  entirely  of  the  dismal  theory  with  which  he 
began.  Scarcely  any  man  who  has  evolved  a  striking 
and  original  conception  of  a  subject  ever  gets  rid  of 
it.  Long  after  he  himself  fancies  that  he  has  cleared 
his  mind  of  it,  every  one  else  sees  that  it  haunts  him 
still.  Mr;  Malthus  was  peculiarly  little  likely  to  get 
rid  of  his  errors.  He  had  published  his  original 
theory,  had  made  a  name  b}^  publishing  it,  and  he 
never  admitted  even  to  himself  how  complete  a 
change  the  foundation  of  his  ideas  had  undergone. 
A  theory  of  population  which  does  not  include  self- 
restraint,  like  his  first,  and  one  which  essentially 
depends  on  it,  like  his  second,  differ  in  their  essence, 
and  therefore  differ  in  their  main  consequences. 
From  a  theory  of  population  which  does  not  include 


Malthus.  193 

a  prudential  check,  it  follows  that  plenty  cannot 
last,  and  that  men  will  always  multiply  down  to 
misery.  But  such  a  theory  with  a  prudential  check, 
has  no  such  consequence.  And  for  many  years  it 
was  a  misfortune  to  the  subject  that  the  original 
propounder  of  what  were  then  the  best  views  of  it, 
had  connected  those  views  with  a  mischievous 
exaggeration,  leading  straight  to  lamentable  results. 

To  most  other  parts  of  Political  Economy  Mr. 
Malthus  added  very  little.  And  on  some  he  sup- 
ported errors  which  were  even  then  becoming 
antiquated.  He  was  a  strenuous  advocate  of 
"  Protection  to  Agriculture,"  and  believed  that  the 
supply  of  all  commodities  might  exceed  the  demand, 
which  is  as  much  as  to  say  that  there  is  too  much 
of  everything.  The  truth  is,  that  Mr.  Malthus  had 
not  the  practical  sagacity  necessary  for  the  treat- 
ment of  Political  Economy  in  a  concrete  way,  or  the 
mastery  of  abstract  ideas  necessary  to  deal  with  it 
in  what  we  should  now  call  a  scientific  way.  He 
tried  a  bad  mixture  of  both.  There  is  a  mist  of 
speculation  over  his  facts,  and  a  vapour  of  fact  over 
his  ideas. 

On  one  important  point  Mr.  Malthus  was,  how- 
ever, in  advance  of  his  time.  He  was  one  of  several 
writers  who,  at  the  same  time,  discovered  the  true 
theory  of  rent.  That  theory  lay,  indeed,  close  to  his 
ideas  on  population.  Its  essence  (as  we  have  seen) 
is,  that  the  rent  of  land  arises  from  the  scarcity  oi 
good  land.  Mr.  Malthus  could  not  help  seeing  that 
Adam  Smith  (and  the  French  economistes)  were  wrong 
in  imputing  rent  to  some  pre-eminent  merit  in  the 

13 


194  Economic  Studies. 


land.  He  saw  that  it  came  from  a  special  fact 
concerning  land,  viz.,  that  so  little  of  it  is  first-rate 
both  in  situation  and  in  quality  ;  that  most  is  either 
not  the  best,  or  not  in  the  best  place,  else  there 
would  be  no  rent  of  land  any  more  than  of  air.  This 
truth  seems  so  plain  that  one  can  scarcely  conceive 
how  it  should  ever  not  have  been  seen.  But 
certainly  it  was  not  seen  till  modern  economists 
pointed  it  out.  And,  then,  as  so  often  happens,  it 
was  on  many  people's  lips  almost  at  once.  The 
fact  was  so  unmistakably  plain  that  several  persons 
could  not  help  seeing  it  the  moment  they  began  to 
search  for  it.  Of  these,  Mr.  Malthus  was  one,  but 
not  the  best.  As  we  shall  see,  a  much  keener 
intellect  than  his  far  more  fully  examined  all  its 
consequences. 

There  is  nothing  in  Mr.  Malthus's  life  which  is 
worth  mentioning,  or  which  illustrated  his  doctrines. 
He  was  an  estimable  gentleman,  and  clerical  pro- 
fessor; a  "mild  pottering  person,"  I  think  Carlyle 
would  have  called  him.  Neither  his  occupation  nor 
his  turn  of  mind  particularly  fitted  him  to  write  on 
money  matters.  He  was  not  a  man  of  business,  nor 
had  he,  like  Paley,  and  similar  clergymen,  a  hard- 
headed  liking  for,  and  an  innate  insight  into,  the  theory 
of  business.  He  was  a  sensible  man  educated  in  the 
midst  of  illusions;  he  felt  a  reaction  against  them, 
and  devoted  the  vigour  of  his  youth  to  disprove  and 
dispel  them.  And  he  made  many  sensible  and  acute 
remarks  on  kindred  topics.  But  he  has  been  among 
the  luckiest  of  authors,  for  he  has  connected  his 
name  with  the  foundation  of  a  lasting  science  whicli 


Mai  thus.  195 

he  did  not  plan,  and  would  by  no  means  have  agreed 
in. 

This  celebrity  may  seem  over-fortunate,  but  it  is 
explained  by  the  circumstances  of  the  time.  The 
age  in  which  he  wrote  was  as  much  against  the 
Godwinian  illusions  as  Mr.  Malthus  could  be.  He 
and  his  father  were  but  an  instance  of  a  general 
contrast  between  successive  generations.  The 
generation  before  1789  was  full  of  hope,  and  de- 
lighted with  happy  schemes;  that  after  it  was  terrified 
by  the  French  Revolution,  insensible  to  hope  and 
ready  for  despair.  To  this  change  of  sentiment  Mr. 
Malthus  effectually  ministered,  and  beneath  this 
want  of  the  surface  there  was  one  much  more  real 
need,  to  which  he  was  of  use  also.  An  immense  tide 
of  sentiment  favoured  the  growth  of  population,  no 
matter  what  the  circumstances  and  what  its  means 
of  subsistence.  Mr.  Pitt,  who  was  the  most  in- 
structed statesman  of  the  time  on  economic  subjects 
said  that  "  the  man  who  had  a  large  family  was  '  a 
benefactor  to  his  country '  ".  And  the  old  English 
Poor  Law  was  simply  a  subsidy  to  the  increase  of 
paupers.  Against  such  notions  and  such  practices 
Mr.  Malthus's  views  were  a  most  admirable  reaction. 
If  there  had  been  no  such  movement  our  agricultural 
districts  would  by  this  time  have  been  a  pauper 
warren.  That  his  views  were  exaggerated,  though  a 
subsequent  misfortune,  was  an  immediate  advantage. 
He  advertised  his  notions  and  fixed  them  among  the 
men  who  understood  a  simple  and  striking  exaggera- 
tion far  more  easily  than  a  full  and  accurate  truth. 
He  created  an  entirely  new  feeling  on  his  subject. 


196  Economic  Studies. 


"  If  we  look,"  says  Mr.  Carlyle,  "  at  the  old  Poor 
Law,  we  shall  find  it  to  have  become  still  more  insup- 
portable, demanding,  if  England  was  not  destined  for 
anarchy,  to  be  done  away  with."  "To  create  men 
filled  with  a  theory"  that  it  ought  to  be  done  away 
with  "was  the  one  thing  needful  "  ;  "  nature  had  no 
readier  way  of  getting  it  done  away  with  ".  To  this 
Mr.  Malthus  most  essentially  contributed.  It  was 
he  who,  more  than  any  one  else,  "  filled  "  men  with 
that  theory. 


197 


RICARDO. 

The  true  founder  of  abstract  Political  Economy  is 
Ricardo.  And  yet  in  seeming  there  was  no  one  less 
likely  to  be  the  founder.  He  was  a  practical  man  of 
business,  who  had  little  education,  who  was  for  much 
of  his  life  closely  occupied  in  a  singularly  absorbing 
trade,  and  who  made  a  fortune  in  that  trade.  Just 
as  no  one  would  have  expected  from  Adam  Smith, 
the  bookish  student,  the  practical  sagacity  with  which 
every  page  of  The  Wealth  of  Nations  overflows,  so  no 
one  would  have  expected  from  Ricardo,  who  made  a 
large  fortune,  the  foundation  of  a  science  of  abstrac- 
tions. Every  one  would,  on  the  contrary,  have 
imagined  that  Adam  Smith  would  have  been  eminent 
in  the  abstractions  among  which  his  closet-life  would 
seem  to  have  been  spent,  and  that  Ricardo  would 
have  been  eminent  in  the  rough  and  rude  sense  which 
makes  money.  But,  in  fact,  Ricardo  arrives  at  his 
best  conclusions  by  the  most  delicate  and  often  diffi- 
cult reasoning,  and  Adam  Smith,  as  we  have  seen,  at 
his  by  an  easy  and  homely  sagacity. 

There  is  much  in  this,  as  in  all  such  cases,  which 
now  is,  and  probably  will  always  remain,  inexplicable  ; 
for  the  most  obscure  and  subtle  of  causes  are  those 
which  fix  inherited  genius.  But,  just  as  in  Adam 
Smith's  case,  a  more  exact  survey  of  the  circumstances 
tends  to  diminish  our  surprise.  The  trade  in  which 
Ricardo  spent  his  life,  and  in  which  he  was  so  sue- 


ig8  Economic  Studies. 

cessful,  is  of  all  trades  the  most  abstract.  Perhaps 
some  people  may  smile  when  they  hear  that  his 
money  was  made  on  the  Stock  Exchange,  which  they 
believe  to  be  a  scene  of  gambling.  But  there  is  no 
place  where  the  calculations  are  so  fine,  or  where 
they  are  employed  on  data  so  impalpable  and  so  little 
"immersed  in  matter".  There  is  a  story  that  some 
dealer  made  very  many  thousand  pounds  by  continued 
dealings  in  the  shares  of  some  railway,  and  then  on 
a  sudden  asked  where  that  railway  was.  The  whole 
thing  had  been  a  series  of  algebraic  quantities  to  him, 
which  called  up  no  picture,  but  which  affected  a 
profit  and  loss  account.  In  most  kinds  of  business 
there  is  an  appeal  of  some  sort  to  the  senses;  there 
are  goods  in  ships  or  machines  ;  even  in  banking 
there  is  much  physical  money  to  be  counted.  But 
the  Stock  Exchange  deals  in  the  "debts,"  that  is  the 
"  promises,"  of  nations,  and  in  the  "  shares  "  of  under- 
takings whose  value  depends  on  certain  future 
dividends — that  is,  on  certain  expectations — and 
what  those  expectations  are  to  be,  is  a  matter  of  nice 
calculation  from  the  past.  These  imponderable 
elements  of  trade  cannot  be  seen  or  handled,  and  the 
dealing  with  them  trains  the  mind  to  a  refinement 
analogous  to  that  of  the  metaphysician.  The  ordinary 
human  mind  finds  a  great  rest  in  fixing  itself  on  a 
concrete  object,  but  neither  the  metaphysician  nor 
the  stock-jobber  has  any  such  means  of  repose. 
Both  must  make  their  minds  ache  by  fixing  them 
intently  on  what  they  can  never  see,  and  by  working 
out  all  its  important  qualities  and  quantities.  A 
stock-jobber  loses  money,  and  in  the  end  is  ruined,  if 


Ricardo.  199 

he  omits  any,  or  miscalculates  any.  If  any  man  of 
business  is  to  turn  abstract  thinker,  this  is  the  one  who 
should  do  so.  Any  careful  reader  of  Ricardo,  who 
knows  anything  of  such  matters,  and  who  watches 
the  anxious  penetration  with  which  he  follows  out 
rarefied  minutiae,  will  very  often  say  to  himself,  "  I 
see  well  why  this  man  made  a  fortune  on  the  Stock 
Exchange  ". 

For  this  trade  Ricardo  had  the  best  of  all  prepara- 
tions— the  preparation  of  race.  He  was  a  Jew  by 
descent  (his  father  was  one  by  religion),  and  for  ages 
the  Jews  have  shown  a  marked  excellence  in  what 
may  be  called  the  "commerce  of  imperceptibles". 
They  have  no  particular  superiority  in  the  ordinary 
branches  of  trade;  an  Englishman  is  quite  their  equal 
in  dealing  with  ordinary  merchandise,  in  machine- 
making,  or  manufacturing.  But  the  Jews  excel  on 
every  Bourse  in  Europe  ;  they — and  Christian  de- 
scendants of  their  blood — have  a  pre-eminence  there 
wholly  out  of  proportion  to  their  numbers  or  even  to 
their  wealth.  Some  part  of  that  pre-eminence  is,  no 
doubt,  owing  to  their  peculiar  position  as  a  race  ;  for 
nearly  two  thousand  years  they  have  been  a  small 
nation  diffused  over  a  vast  area ;  that  diffusion  has 
made  them  the  money-lenders  for  most  of  the  nations 
with  whom  they  lived ;  and  the  exchange  of  money 
between  country  and  country  is  a  business  of  fine 
calculation,  which  prepared  them  for  other  fine 
calculations.  This  long  experience  has  probably 
developed  a  natural  aptitude,  and  it  would  be  idle  to 
distinguish  what  is  due  to  the  one  in  comparison  with 
the  other.     The  fact  remains  that  the  Jews  have  now 


200  Economic  Studies. 

an  inborn  facility  in  applying  figures  to  pure  money 
matters.  They  want,  less  than  other  nations,  a 
visible  commodity  which  they  can  imagine,  if  not 
touch ;  they  follow  with  greater  ease  and  greater 
nicety  all  the  minute  fractions  on  which  this  subtle 
commerce  depends  (a  task  which  is  a  particular 
torture  to  most  Englishmen),  and  they  make  money 
as  the  result.  The  writings  of  Ricardo  are  unique 
in  literature,  so  far  as  I  know,  as  a  representative  on 
paper  of  the  special  faculties  by  which  the  Jews  have 
grown  rich  for  ages.  The  works  of  Spinoza,  and 
many  others,  have  shown  the  power  of  the  race 
in  dealing  with  other  kinds  of  abstraction ;  but 
I  know  none  but  Ricardo's  which  can  awaken  a 
book-student  to  a  sense  of  the  Jewish  genius  for  the 
mathematics  of  money-dealing.  His  mastery  over 
the  abstractions  of  Political  Economy  is  of  a  kind 
almost  exactly  identical. 

The  peculiar  circumstances  of  his  time  also  con- 
ducted Ricardo  to  the  task  for  which  his  mind  was 
most  fit.  He  did  not  go  to  Political  Economy — 
Political  Economy,  so  to  say,  came  to  him.  He  lived 
in  the  "  City"  at  a  time  when  there  was  an  incessant 
economic  discussion  there.  He  was  born  in  1772,  and 
had  been  some  years  in  business  in  1797,  the  year 
of  the  celebrated  "Bank  restriction,"  which  "re- 
stricted "  the  Bank  of  England  from  paying  its  notes 
in  coin,  and  which  established  for  the  next  twenty 
years  in  England  an  inconvertible  paper  currency. 
As  to  this — as  to  the  nature  of  its  effect,  and 
even  as  to  whether  it  had  an  effect, — there  was  an 
enormous  amount    of  controversy.      Ricardo   could 


Ricardo.  20 1 

not  have  helped  hearing  of  it,  and  after  some  years 
took  an  eager  part  in  it.  Probably,  if  he  had  not 
been  led  in  this  way  to  write  pamphlets,  he  would 
never  have  written  anything  at  all,  or  have  got  the 
habit  of  consecutive  dealing  with  difficult  topics, 
which  is  rarely  gained  without  writing.  He  had 
only  a  common  school  education,  and  no  special 
training  in  such  things.  But  it  is  the  nature  of  an 
inconvertible  currency  to  throw  the  dealings  between 
other  countries  and  the  country  which  has  it,  into 
confusion,  and  to  change  the  price  of  all  its  securities. 
As  Ricardo  was  a  jobber  on  the  English  Stock 
Exchange  for  the  whole  time  during  which  the  notes 
of  the  Bank  of  England  were  inconvertible,  his  daily 
business  must  have  constantly  felt  the  effect. 

Having  been  thus  stimulated  to  write  pamphlets 
on  the  one  great  economic  subject  of  his  day, 
Ricardo  was  naturally  led  to  write  them  also  on  the 
other  great  one.  At  the  close  of  the  war  the  Eng- 
lish Parliament  was  afraid  that  corn  would  be  too 
cheap  ;  the  war  had  made  it  dear,  and  probably  when 
peace  came  it  would  cease  to  be  dear.  And  there- 
fore, in  its  wisdom,  Parliament  passed  "  Corn  Laws  " 
to  keep  it  dear.  And  it  would  have  been  difficult  for 
a  keen  arguer  and  clear  thinker  like  Ricardo  to 
abstain  from  proving  that  Parliament  was  wrong. 
And,  accordingly,  he  wrote  some  essays  which  would 
be  called  "  dry  and  difficult "  now,  but  which  were 
then  read  very  extensively  and  had  much  influence. 

Political  Economy  was,  indeed,  the  favourite  sub- 
ject in  England  from  about  1810  to  1840,  and  this  to 
an  extent  which  the  present  generation  can  scarcely 


202  Economic  Studies. 


comprehend.  Indeed,  old  people  are  puzzled  for  an 
opposite  reason ;  they  can  hardly  understand  the 
comparative  disappearance  of  what  was  the  principal 
topic  in  their  youth.  They  mutter,  with  extreme 
surprise,  "we  hardly  hear  anything  now  about 
Political  Economy ;  we  used  to  hear  of  nothing  so 
much".  And  the  fundamental  cause  is  the  great  im- 
provement in  the  condition  of  the  country.  For  the 
thirty  years  succeeding  the  peace  of  1815  England 
was  always  uncomfortable.  Trade  was  bad,  employ- 
ment scarce,  and  all  our  industry  depressed,  fluctuat- 
ing, and  out  of  heart.  So  great  is  the  change  of 
times,  that  what  we  now  call  bad  trade  would  then 
have  seemed  very  good  trade,  and  what  we  now  call 
good  trade  would  have  been  too  good  to  be  thought 
of — would  have  been  deemed  an  inconceivable 
Elysian  and  Utopian  dream.  So  long  as  this  misery 
and  discomfort  continued,  there  was  a  natural  curio- 
sity as  to  the  remedy.  Business  being  bad,  there 
was  a  great  interest  in  the  "  science  of  business," 
which  ought  to  explain  why  it  was  thus  bad,  and 
might  be  able  to  show  how  it  was  to  be  made  good. 
While  the  economic  condition  of  countries  is  bad, 
men  care  for  Political  Economy,  which  may  tell  us 
how  it  is  to  be  improved ;  when  that  condition  is  im- 
proved. Political  Economy  ceases  to  have  the  same 
popular  interest,  for  it  can  no  longer  prescribe  any- 
thing which  helps  the  people's  life.  In  no  age  of 
England,  either  before  or  since,  could  a  practical 
man  of  business,  like  Ricardo,  have  had  so  many  and 
such  strong  influences  combining  to  lead  him  to- 
wards Political  Econom}-,  as  in  Ricardo's  own  time. 


Ricardo.  203 

And  there  was  at  that  time  a  philosophical  fashion 
which  was  peculiarly  adapted  to  make  him  think 
that  the  abstract  mode  of  treating  the  subject  which 
was  most  suitable  to  his  genius  was  the  right  mode. 
It  was  the  age  of  "  philosophical  Radicalism,"  a 
school  of  philosophy  which  held  that  the  whole  theory 
of  Political  Government  could  be  deduced  from  a  few 
simple  axioms  of  human  nature.  It  assumed  certain 
maxims  as  to  every  one's  interest,  and  as  to  every 
one  always  following  his  interest,  and  from  thence 
deduced  the  universal  superiority  of  one  particular 
form  of  Government  over  all  others.  "  Euclid  "  was 
its  one  type  of  scientific  thought,  and  it  believed  that 
type  to  be,  if  not  always,  at  least  very  often,  attain- 
able. From  a  short  series  of  axioms  and  definitions 
it  believed  that  a  large  part  of  human  things,  far 
more  than  is  really  possible,  could  be  deduced.  The 
most  known  to  posterity  of  this  school  (and  probably 
its  founder)  was  Mr.  Bentham,  for  the  special  value 
of  his  works  on  jurisprudence  has  caused  his  name 
to  survive  the  general  mode  of  political  thinking 
which  he  was  so  powerful  in  introducing.  But  a 
member  of  the  sect,  almost  equally  influential  in  his 
own  time,  was  Mr.  James  Mill,  of  whom  his  son  has 
given  us  such  a  graphic  picture  in  his  biography. 
This  austere  dogmatist  thought  that  the  laws  of 
Government  and  of  human  happiness  might  be 
evolved  from  some  few  principles,  just  as  a  Calvinistic 
theologian  evolves  a  whole  creed  of  human  salvation 
from  certain  others.  Mr.  Grote,  who  belonged  for 
the  best  years  of  his  life  to  the  sect,  and  whose 
writings  and  tone  of  mind  were  profoundly  tinctured 


204  Economic  Studies. 


by  its  teaching,  has  left  us  a  vivid  description  of 
Mr.  James  Mill,  who  seems  to  have  influenced  him 
far  more  than  any  one  else.  And  an  equally  vivid 
picture  may  still  be  found  in  the  reminiscences  of  a 
few  old  men,  who  still  linger  in  London  society,  and 
who  are  fond  of  recalling  the  doctrines  of  their  youth, 
though  probably  they  now  no  longer  believe  them. 
James  Mill  must  have  pre-eminently  possessed  the 
Socratic  gift  of  instantaneously  exciting  and  perman- 
ently impressing  the  minds  of  those  around  him. 

I  do  not  know  in  what  manner  Ricardo  and  James 
Mill  became  acquainted,  except  that  John  Mill  says 
it  was  through  Bentham,  who  was  a  rich  man,  and, 
though  a  recluse,  made  for  many  years  his  house  a 
sort  of  castle.  John  Mill  tells  us  also  that  James 
Mill  considered  the  friendship  of  Ricardo  to  have 
been  the  most  valuable  of  his  whole  life.  To  a  genius 
like  Ricardo,  with  Ricardo's  time  and  circumstances, 
the  doctrines  of  James  Mill  must  have  come  like  fire 
to  fuel ;  they  must  have  stimulated  the  innate  desire 
to  deduce  in  systematic  connection  from  the  fewest 
possible  principles,  the  truths  which  he  had  long 
been  considering  disconnectedly.  If  Ricardo  had 
never  seen  James  Mill  he  would  probably  have  written 
many  special  pamphlets  of  great  value  on  passing 
economic  problems,  but  he  would  probably  not  have 
written  On  the  Principles  of  Political  Economy  and 
Taxation,  and  thus  founded  an  abstract  science  ;  it 
takes  a  great  effort  to  breathe  for  long  together  the 
"thin  air"  of  abstract  reasoning. 

It  must  be  remembered  that  Ricardo  was  in  no 
high  sense  an  educated  man.     As  far  as  we  know  he 


Ricardo,  205 

had  not  studied  any  science,  and  had  no  large  notion 
of  what  science  was  ;  without  encouragement  from  a 
better-trained  mind  he  most  likely  would  not  have 
attempted  any  purely  scientific  effort.  To  the  end  of 
his  days,  indeed,  he  never  comprehended  what  he 
was  doing.  He  dealt  with  abstractions  without 
knowing  that  they  were  such  ;  he  thoroughly  be- 
lieved that  he  was  dealing  with  real  things.  He 
thought  that  he  was  considering  actual  human 
nature  in  its  actual  circumstances,  when  he  was 
really  considering  a  fictitious  nature  in  fictitious 
circumstances.  And  James  Mill,  his  instructor  on 
general  subjects,  had  on  this  point  as  little  true 
knowledge  as  he  had  himself.  James  Mill,  above 
all  men,  believed  that  you  could  work  out  the  con- 
crete world  of  human  polity  and  wealth  from  a  few 
first  truths.  He  would  have  shuddered  at  our 
modern  conception  of  Political  Economy  as  a  con- 
venient series  of  deductions  from  assumed  axioms 
which  are  never  quite  true,  which  in  many  times  and 
countries  would  be  utterly  untrue,  but  which  are 
sufficiently  near  to  the  principal  conditions  of  the 
modern  world  to  make  it  useful  to  consider  them  by 
themselves.  At  that  time  economists  indulged  in 
happy  visions ;  they  thought  the  attainment  of  truth 
far  easier  than  we  have  since  found  it  to  be.  They 
were  engaged  in  a  most  valuable  preliminary  work, 
one  which  is  essential  to  the  conception  of  the  pheno- 
mena of  wealth  in  such  an  age  as  this,  or  in  any  age 
in  which  free  industry  has  made  much  progress  ;  but 
after  this  preliminary  work  is  finished  there  is  a  long 
and    tedious    time    to    be    spent    in    comparing   the 


2o6  Economic  Studies. 

assumptions  we  have  made  in  it  with  the  facts  which 
we  see,  and  in  adding  the  corrections  which  that 
comparison  suggests ;  and  only  at  the  end  of  this 
dull  task  can  we  leave  mere  reasoning  and  come  to 
life  and  practice. 

Little  is  known  of  Ricardo's  Hfe,  and  of  that  little 
only  one  thing  is  worth  mentioning  in  a  sketch  like 
this — that  he  went  into  Parliament.  He  had  retired 
with  a  large  fortune  from  business  comparatively 
young,  not  much  over  forty,  as  far  as  I  can  make  out, 
and  the  currency  and  other  favourite  economic  sub- 
jects of  his  were  so  much  under  discussion  in  Parlia- 
ment, that  he  was  induced  to  enter  it.  At  present 
an  abstract  philosopher,  however  wealthy,  does  not 
often  enter  Parliament ;  there  is  a  most  toilsome, 
and  to  him  probably  disagreeable,  labour  to  be  first 
undergone — the  canvassing  a  popular  constituency. 
But  fifty  years  ago  this  was  not  essential.  Ricardo 
entered  Parliament  for  Portarlington,  which  is  now 
the  smallest  borough  in  Ireland,  or  indeed,  in  the 
whole  United  Kingdom,  and  which  was  then  a  mere 
rotten  or  proprietary  borough,  and  no  doubt  Ricardo 
bought  his  seat  of  the  proprietor.  He  was  well  re- 
ceived in  the  House,  and  spoke  with  clearness  and 
effect  on  his  own  subjects.  He  is  said  to  have  had 
in  conversation  a  very  happy  power  of  lucid  explana- 
tion, and  he  was  able  to  use  the  same  power  in  a 
continuous  speech  to  an  assembly.  His  wealth,  no 
doubt,  gave  him  a  facility  in  acquiring  respect. 
Parliament,  like  every  other  collection  of  English- 
men, is  much  more  ready  to  trust  a  rich  man  about 
money  than  a  poor  one. 


Ricardo.  207 

The  most  curious  characteristic  of  Ricardo's 
political  career  was  his  zeal  to  abolish  the  means 
by  which  he  entered  Parliament ;  he  was  most 
anxious  for  a  Parliamentary  Reform  much  resem- 
bling in  principle  that  of  1832.  And  in  this  he  agreed 
with  most  of  the  sensible  men  of  his  time.  The 
narrow-mindedness  and  the  want  of  capacity  with 
which  the  Tory  party  had  governed  the  country 
since  the  peace,  are  now  only  known  to  us  from 
history,  and  are  not  easily  believed  by  those  who 
have  not  carefully  studied  that  history.  As  was  the 
tree,  so  were  its  fruits ;  the  Government  seemed  to 
be  one  which  must  hurt  a  country,  and  in  fact  the 
country  was,  if  not  very  unhappy,  at  any  rate  most 
uncomfortable.  The  best  cure  seemed  to  be  a  change 
of  rulers,  by  a  large  addition  to  the  popular  element 
in  the  Government.  And,  as  we  now  know,  this  has 
been  effectual.  The  country  has  been  far  happier 
under  the  new  system  than  under  the  old,  and  the 
improvement  has  been  greatly  due  to  the  change  ; 
we  could  not  have  had  Free  Trade  before  1832,  and 
it  is  Free  Trade  which  more  than  any  other  single 
cause  makes  us  so  happy.  The  change  in  popular 
comfort  has  been  greater  than  Ricardo  or  than  any 
one  of  his  generation  could  have  imagined.  But  we 
have  had  to  pay  a  good  price  for  it,  and  one  of  the 
items  in  that  price  is  the  exclusion  of  philosophers 
from  Parliament.  Such  a  thinker  as  Ricardo,  with 
the  unflinching  independence  which  characterised 
Ricardo,  would  be  impossible  in  our  recent  Parlia- 
ments. No  popular  constituency  would  consent  to 
elect  such  a  man.  nor  would  he  consent  to  ask  them, 


2o8  Economic  Studies. 

Very  little  is  now  to  be  learnt  of  Ricardo's  ordinary 
life.     We  know  that  he  had  a  mind — 

keen,  intense,  and  frugal, 
Apt  for  all  affairs. 

And  we  know  little  else,  A  W'ell-authenticated  tradi- 
tion says  that  he  was  most  apt  and  ready  in  the  minut- 
est numerical  calculations.  This  might  be  gathered 
from  his  works,  and,  indeed,  any  one  must  be  thus 
apt  and  ready  who  thrives  on  the  Stock  Exchange. 
A  less  authorised  story  says  that  he  was  a  careful 
saver  of  small  sums — "one  of  those  people  who 
would  borrow  a  pamphlet,  price  sixpence,  instead  of 
buying  it,"  notwithstanding  that  he  was  a  rich  man. 
We  also  know,  as  has  been  said,  that  he  was  very 
happy  in  orally  explaining  his  doctrines,  and  they  are 
by  no  means  easy  to  explain  in  that  way.  He  must 
have  been  most  industrious,  for  he  died  at  fifty-two ; 
and  either  the  thinking  which  he  did,  or  the  fortune 
which  he  made,  would  be  generally  esteemed,  even 
by  laborious  men,  a  sufficient  result  for  so  short  a 
life.i 

1  [Mr.  Bagehot  had  intended,  as  the  reader  will  have  seen, 
to  give  an  estimate  of  J.  S.  Mill  similar  to  those  of  Malthus 
and  Ricardo.  As  he  did  not  carry  out  this  intention,  I  think  it 
well  to  give  some  brief  passages  from  a  shorter  paper  on  Mill, 
written  on  the  occasion  of  his  death,  which  contain  Mr. 
Bagehot's  general  view  of  Mill's  economic  position.  These 
will  be  found  in  Note  B,  at  the  end  of  the  volume. — Editor. 1 


2og 


THE  GROWTH  OF  CAPITAL. 

The  conclusion  that  English  Political  Economy  is 
an  analysis  only  of  industrial  societies  which  are  to 
a  certain  extent  developed,  will  be  strengthened  by 
a  consideration  of  the  doctrines  which  that  Political 
Economy  teaches  us  as  to  one  of  the  principal  parts 
of  the  subject — the  theory  of  the  growth  of  capital. 
Our  Political  Economy  does  not  reeognise  that 
there  is  a  vital  distinction  between  the  main  mode 
in  which  capital  grows  in  such  countries  as  England 
now,  and  the  mode  in  which  it  grew  in  all  countries 
at  first. 

The  principal  way  in  which  capital  increases  in 
England  now,  is  by  abstinence  from  enjoyment. 
We  receive  our  incomes  in  money,  and  either  we 
spend  them  on  our  enjoyments,  in  which  case  capital 
is  not  increased,  for  our  incomes  are  all  gone  and 
no  new  productive  thing  is  made,  or  we  abstain 
from  enjoyment  and  put  our  money  into  trade  our- 
selves, supposing  that  we  are  in  trade,  and  supposing 
that  we  are  not  in  trade,  lend  it  to  those  who  are. 
The  productive  part  of  wealth — the  wealth  which 
creates  other  wealth — is  augmented  mainly  by  our 
not  enjoying  our  incomes. 

But  there  is  another  mode  of  augmenting  capital 
of  which  Defoe  gives  us,  perhaps,  a  more  vivid 
notion  than  we  can  get  elsewhere.  "  I  cannot  say,"" 
says    Robinson    Crusoe,   "  that    after   this,    for  five 

14 


210  Economic  Studies. 


years,  any  extraordinary  thing  happened  to  me ; 
but  I  lived  on  in  the  same  course,  in  the  same  pos- 
ture and  place  just  as  before ;  the  chief  thing  I  was 
employed  in,  besides  my  yearly  labour  of  planting 
my  barley  and  rice,  and  curing  my  raisins,  of  both 
which  I  always  kept  up  just  enough  to  have  sufh- 
cient  stock  of  the  year's  provisions  beforehand ;  I 
say,  besides  this  yearly  labour,  and  my  daily  labour 
of  going  out  with  my  gun,  I  had  one  labour  to  make 
me  a  canoe,  which  at  last  I  finished :  so  that  by 
digging  a  canal  to  it,  six  feet  wide,  and  four  feet 
deep,  I  brought  it  into  the  creek,  almost  half  a  mile. 
As  for  the  first,  that  was  so  vastly  big,  as  I  made 
it  without  considering  beforehand,  as  I  ought  to  do, 
how  I  should  be  able  to  launch  it ;  so  never  being 
able  to  bring  it  to  the  water,  or  bring  the  water  to 
it,  I  was  obliged  to  let  it  lie  where  it  was,  as  a 
memorandum  to  teach  me  to  be  wiser  next  time. 
Indeed  the  next  time  though  I  could  not  get  a  tree 
proper  for  it,  and  was  in  a  place  where  I  could  not 
get  the  water  to  it,  at  any  less  distance  than,  as  I 
have  said,  of  near  half  a  mile ;  yet  as  I  saw  it  was 
practicable  at  last,  I  never  gave  it  over ;  and  though 
I  was  near  two  years  about  it,  yet  I  never  grudged 
my  labour,  in  hopes  of  having  a  boat  to  go  off  to 
sea  at  last.""  But  in  this  case  there  was  evidently 
no  abstinence  from  enjoyment.  Robinson  Crusoe 
had  only  the  bare  means  of  subsistence ;  he  had  no 
pleasant  things  to  give  up ;  but  he  employed  his 
time  and  labour  in  making  a  vessel,  a  piece  of 
capital,  if  ever  there  was  one. 

just  similar  is  the  practice  of  primitive  societies. 


Tlie  Groivih  of  Capital.  2ii 


When  a  savage  in  the  stone  age  made  a  flint  im- 
plement he  relinquished  no  satisfaction.  Having 
nothing  else  to  do  he  made  a  tool,  which  has  been 
the  beginning  of  all  other  tools.  "  Mankind,"  says 
a  recent  writer/  "  may  have  discovered  how  to 
manufacture  earthen  vessels  in  various  ways.  Sir 
John  Lubbock  points  out  that  Captain  Cook  saw 
stones  surrounded  with  a  rim  of  clay  in  use  among 
the  Aleutians  on  Unalashka;  but  this  might  be 
an  imitation  of  European  vessels  with  which  the 
islanders  had  already  become  acquainted  through 
Russian  sailors.  The  practice  of  the  Australians 
on  the  Lower  Murray  River,  of  puddling  holes  in 
the  earth  with  clay  and  cooking  food  in  them,  might 
perhaps  have  led  an  inventive  mind  to  the  manu- 
facture of  earthen  vessels.  But  the  process  is  better 
explained  by  the  account  of  the  French  sailor  Gonne- 
ville,  who,  in  1504,  landed  on  a  South  Atlantic  coast, 
probably  in  Brazil.^  He  describes  certain  wooden 
vessels  in  use  among  the  natives  (in  whom  D'Avezac 
fancies  that  he  recognises  Brazilian  Carijo)  enveloped 
in  a  coating  of  clay  as  a  protection  from  the  fire.^ 
If  by  chance  the  wooden  bowl  separated  itself  from 
the  covering  of  clay,  an  earthen  vessel  would  remain. 
In  examining  the  site  of  an  old  pottery  manufactory 
of  the  Red  Indians  on  the  Cahokia,  which  falls  into 
the  Mississippi  below  St.  Louis,  Carl  Rau  discovered 

1  Oscar  Peschel's  Races  of  Man  and  their  Geographical  Dis- 
tribution, page  168. 

"^  Pierre  Mart^ry,  Les  Navigations  Fraiigaises,  1867. 
•  D'Avezac,  Voyage  du  Capitaine  Gonneville,  i86(j. 


2t2  Economic  Studies. 


half-finished  vessels,  that  is  to  say,  baskets  of  rushes 
or  willow,  lined  inside  with  clay," 

These  primitive  potters  had  no  luxuries  to  forego, 
and  had  no  "income"  to  spend  on  luxuries.  They 
simply  had  spare  time  and  unused  handiness,  and 
with  this  they  made  the  first  pots,  which  were  the 
beginning  of  all  pots — the  ancestors  first  of  the  tea 
kettle  and  then  of  the  condensing  engine. 

In  the  same  way  there  was  no  sacrifice  of  pleasure 
in  the  greatest  source  of  early  capital — the  taming 
of  animals ;  on  the  contrary,  according  to  the  most 
probable  theory,  there  was  a  new  pleasure  in  taming 
them  which  did  not  require  the  surrender  of  any  old 
pleasure. 

Mr.  Galton  has  shown  that  in  all  probability  the 
taming  of  animals  began,  not  in  the  restraining  of 
any  impulses,  but  in  the  indulgence  of  some  very 
simple  ones.^  "  The  domestication  of  animals,"  he 
tells  us,  "  is  one  of  the  few  relics  of  the  past  whence 
we  may  reasonably  speculate  on  man's  social  con- 
dition in  very  ancient  times.  We  know  that  the 
domestication  of  every  important  member  of  our 
existing  stock  originated  in  prehistoric  ages,  and, 
therefore,  that  our  remote  ancestors  accomplished 
in  a  variety  of  cases,  what  we  have  been  unable  to 
effect  in  any  single  instance.  The  object  of  my 
paper  is  to  discuss  the  character  of  ancient  civilisa- 
tion, as  indicated  by  so  great  an  achievement.  Was 
there    a   golden    age    of    advanced    enlightenment  ? 

^  Domestication  of  Animals,  by  Francis  Galton,  F.R.S.  Re- 
printed from  the  Transactions  of  the  Ethnological  Society, 
1865,  p.  I. 


The  Growth  of  Capital.  213 

Have  extraordinary  geniuses  arisen  who  severally 
taught  their  contemporaries  to  tame  and  domesticate 
the  dog,  the  ox,  the  sheep,  the  hog,  the  fowl,  the 
camel,  the  llama,  the  reindeer,  and  the  rest  ?  Or 
again,  Is  it  possible  that  the  ordinary  habits  of  rude 
races,  combined  with  the  qualities  of  the  animals  in 
question,  have  sufficed  to  originate  every  instance 
of  established  domestication  ?  The  conclusion  to 
which  I  have  arrived,  is  entirely  in  favour  of  the 
last  hypothesis.  My  arguments  are  contained  in  the 
following  paper;  but  I  will  commence  by  stating 
their  drift,  lest  the  details  I  introduce  should  seem 
trifling  or  inconsequent.  It  will  be  this :  All  sav- 
ages maintain  pet  animals,  many  tribes  have  sacred 
ones,  and  kings  of  ancient  states  have  imported  captive 
animals,  on  a  vast  scale,  from  their  barbarian  neigh- 
bours. I  infer  that  every  animal,  of  any  pretensions, 
has  been  tamed  over  and  over  again,  and  has  had 
Numerous  opportunities  of  becoming  domesticated. 
But  the  cases  are  rare  in  which  these  opportunities 
can  lead  to  any  result.  No  animal  is  fitted  for 
domestication  unless  it  fulfils  certain  stringent  con- 
ditions, which  I  will  endeavour  to  state  and  to  discuss. 
My  conclusion  is,  that  all  domesticable  animals  of 
any  note,  have  long  ago  fallen  under  the  yoke  of 
man.  In  short,  that  the  animal  creation  has  been 
pretty  thoroughly,  though  half  unconsciously,  ex- 
plored, by  the  every-day  habits  of  rude  races  and 
simple  civilisations.*" 

And  after  enumerating  the  qualities  which  a  tame- 
able animal  must  possess,  which  are  hardiness, 
fondness  lor  man  (which   some  animals  now  used 


214  Economic  Studies. 

have,  while  others  have  not),  desire  of  comfort, 
easiness  to  tend,  willingness  to  breed,  and  useful- 
ness to  the  human  race,  he  adds:^  "The  utility  of 
the  animals  as  a  store  of  future  food,  is  undoubtedly 
the  most  durable  reason  for  maintaining  them ;  but 
I  think  it  was  probably  not  so  early  a  motive  as  the 
chiefs  pleasure  in  possessing  them.  That  was  the 
feeling  under  which  the  menageries,  described  above 
were  established.  Whatever  the  despot  of  savage 
tribes  is  pleased  with,  becomes  invested  with  a  sort 
of  sacredness.  His  tame  animals  would  be  the  care 
of  all  his  people,  who  would  become  skilful  herdsmen 
under  the  pressure  of  fear.  It  would  be  as  much  as 
their  lives  were  worth  if  one  of  the  creatures  were 
injured  through  their  neglect.  I  believe  that  the 
keeping  of  a  herd  of  beasts,  with  the  sole  motive  of 
using  them  as  a  reserve  for  food,  or  as  a  means  of  bar- 
ter, is  a  late  idea  in  the  history  of  civilisation.  It  has 
now  become  established  among  the  pastoral  races  of 
South  Africa,  owing  to  the  traffickings  of  the  cattle 
traders,  but  it  was  by  no  means  prevalent  in  Damara- 
Land  when  I  travelled  there  twelve  years  ago.  I 
then  was  surprised  to  observe  the  considerations 
that  induced  the  chiefs  to  take  pleasure  in  their 
vast  herds  of  cattle.  They  were  valued  for  their 
stateliness  and  colour,  far  more  than  for  their  beef 
They  were  as  the  deer  of  an  English  squire,  or  as 
the  stud  of  a  man  who  has  many  more  horses  than 
he  can  ride.     An   ox  was  almost   a  sacred  beast  in 

^Domestication  of  Animals,  by  Francis  Galton,  F.R.S.  Re- 
printed from  the  Transactions  of  the  Ethnological  Society, 
1865,  p.  14. 


The  Growth  of  Capital.  215 

Damara-Land,  not  to  be  killed  except  on  momentous 
occasions,  and  then  as  a  sort  of  sacrificial  feast,  in 
which  all  bystanders  shared.  The  payment  of  two 
oxen  was  hush-money  for  the  life  of  a  man.  I  was 
considerably  embarrassed  by  finding  that  I  had 
the  greatest  trouble  in  buying  oxen  for  my  own 
use,  with  the  ordinary  articles  of  barter.  The 
possessors  would  hardly  part  with  them  for  any 
remuneration  ;  they  would  never  sell  their  handsom- 
est beasts."  And  he  concludes :  "  I  see  no  reason 
to  suppose  that  the  first  domestication  of  any  animal, 
except  the  elephant,  implies  a  high  civilisation  among 
the  people  who  established  it.  I  cannot  believe  it 
to  have  been  the  result  of  a  preconceived  intention, 
followed  by  elaborate  trials,  to  administer  to  the 
comfort  of  man.  Neither  can  I  think  it  arose  from 
one  successful  effort  made  by  an  individual,  who 
might  thereby  justly  claim  the  title  of  benefactor  to 
his  race  ;  but,  on  the  contrary,  that  a  vast  number 
of  half-conscious  attempts  have  been  made  through- 
out the  course  of  ages,  and  that  ultimately,  by  slow 
degrees,  after  many  relapses,  and  continued  selection, 
our  several  domestic  breeds  became  firmly  estab- 
lished." 

This  theory  is  one  of  the  most  valuable  fruits  of 
that  contact  of  the  most  cultivated  living  minds  with 
the  least  so — of  men  of  science  with  savages,  which 
is  characteristic  of  this  generation.  And  though  its 
details  may  be  modified,  its  essence  seems  certain, 
and  it  shows  that  this  great  form  of  early  capital,  the 
live  form,  did  not  begin  with  abstinence  at  all. 

Even  in  such  times  as  are  described  in  the  Book 


2i6  Economic  Studies. 

of  Genesis — the  specially  pastoral  times — abstinence 
was  not  the  main  source  of  capital.  When  we  are 
told  that  the  flocks  and  herds  of  certain  patriarchs 
"  grew  and  multiplied  exceedingly,"  those  patriarchs 
were  sacrificing  nothing.  They  had  enough  to  eat 
and  to  drink — the  women  of  their  household  made 
their  clothes — they  had  few  other  conscious  wants, 
and  still  fewer  means  of  supplying  those  which  they 
had.  The  vast  increase  of  animal  power  which 
helped  on  after-wealth  so  much,  had  probably  its 
origin  in  the  pride  of  the  eye,  in  the  love  of  the 
spectacle  of  wealth,  as  much  as  in  anything.  Abra- 
ham and  Jacob  were  pleased  to  see  "  their  cattle  wax 
great  and  cover  the  whole  land,"  and,  therefore,  they 
let  them  cover  it.  There  was  no  luxury  to  them 
equal  to  this.  There  was  not  even  a  competing 
one. 

Another  analogous  source  of  capital  in  early  times 
was  making  slaves  and  breeding  slaves.  Yet  neither 
in  the  capture  nor  in  the  breeding  was  there  any 
kind  of  relinquishment  of  enjoyment.  The  slaves 
were  gained  in  the  fortune  of  war,  and  if  A  had  not 
enslaved  B,  B  would  have  enslaved  A.  The  joy  of 
the  combat  was,  perhaps,  the  greatest  known  in  those 
times.  And  even  in  the  cruellest  times  it  was  pro- 
bably pleasanter  to  spare  the  life  of  the  captive  than 
to  take  it. 

A  similar  source  is  marriage,  which,  indeed,  is  all 
but  the  same,  for  even  the  highest  wives  of  primitive 
ages  worked  in  the  house,  much  like  slaves,  and  the 
concubines,  who  really  were  slaves,  were  but  faintly 
divided  from  these  wives.     But  it  would  be  absurd 


The  Growth  of  Capital.  217 

to  call  keeping  a  harem  a  kind  of  abstinence,  though 
harems  were  a  great  form  of  capital,  and  the  members 
of  them  made  a  great  deal  of  wealth. 

The  reason  why  we  now  so  closely  connect  "  ab- 
stinence" with  capital  is,  that  the  final  product  of  our 
industr)'  is  almost  always  received  in  what  I  may  call 
an  "  optional  "  medium.  Almost  all  our  wealth  is 
created  to  be  exchanged,  and  that  exchange  is 
effected  by  means  of  money  ;  we  can  either  use  that 
money  to  buy  perishable  things  which  produce 
nothing,  or  we  can  "  invest  "  it,  as  we  say,  in  some 
producing  business,  or  lend  it  to  some  one — generally 
to  some  one  engaged  in  production — who  will  pay  an 
interest  upon  it.  But  in  a  state  of  society  where 
things  are  not  created  to  be  exchanged,  "  abstinence  " 
plays  no  such  constant  part.  Men  must,  it  is  true, 
abstain  from  eating  the  food  which  is  necessary  for 
their  subsistence  hereafter,  and  the  food  so  obtained 
is,  certainly,  "  capital  "  obtained  by  abstinence.  But 
most  permanent  things  which  are  made  are  like  the 
"  flint  implement,"  and  the  primitive  clay  vessel, 
things  which  contribute  to  daily  comfort  because 
they  are  in  daily  use.  The  industry  which  created 
them  never  assumed  an  optional  form,  it  was  from 
the  beginning  fixed  in  the  particular  form  in  which 
it  was  created  ;  neither  can  be  sold  or  exchanged,  for 
we  are  supposing  a  state  of  society  in  which  there 
is  no  exchange  or  sale. 

A  primitive  patriarchal  society  is  in  fact  very  like 
this.  Either  exchange  or  sale  was  a  very  rare  act 
in  the  lives  of  such  persons  as  Lot  or  Abraham. 
They  rarely  saw  an)  one  to  exchange  with.     They 


2i8  Economic  Studies. 


rarely  went  down  into  Egypt  to  buy  anything ;  they 
rarely  saw  any  sort  of  travelling  merchant  to  whom 
they  could  sell  anything.  The  life  of  such  persons  is 
a  life  of  production,  not  for  sale,  but  for  use,  as  far 
as  it  is  a  life  of  production  at  all. 

Hire  is  a  still  rarer  phenomenon  at  such  a  period. 
Hire  as  a  rule  involves  proximity  of  residence,  so 
that  the  lender  may  be  sure  the  hirer  will  return  his 
article.  If  the  borrower  goes  off  to  an  unknown 
distance  no  one  can  be  sure  that  he  will  do  so.  Nor 
for  the  most  part  is  trust,  which  is  essential  in  a  loan, 
developed  in  societies  till  men  have  long  lived  near 
together,  till  they  have  learnt  to  know  one  another, 
and  till  they  have  created  some  sort  of  law,  or  formed 
some  effectual  custom  which  partly  punishes  and 
partly  prevents  bad  faith.  The  diffused  habit  of 
lending  things,  which  is  the  basis  of  so  much  of 
modern  industry,  is  in  truth  a  habit  hard  to  diffuse, 
and  one  which  the  earliest  men  could  not  learn. 

Nor  even  when  the  hire  of  capital  does  begin  to 
be  an  important  part  of  industrial  organisation  is 
there  necessarily  any  abstinence  from  enjoyment  in 
the  possessor.  Sir  Henry  Maine  describes,  in  his 
Early  Imtitutions,  a  condition  of  Irish  society  which 
was  based  on  the  loan  of  "  cattle  " — the  main  capital 
then  existing — in  which  there  was  no  abstinence  in 
the  lender  at  all.  "Every  considerable  tribe,"  he 
tells  us,  "  and  almost  every  smaller  body  of  men 
contained  in  it,  is  under  a  chief,  whether  he  be  one 
of  the  many  tribal  rulers  whom  the  Irish  records  call 
kings,  or  whether  he  be  one  of  those  heads  of  joint 
families  whom  the   Anglo-Irish    lawyers  at  a   later 


The  Growth  of  Capital.  219 

date  called  the  Capita  Cognationum.  Bui  he  is  not 
owner  of  the  tribal  land.  His  own  land  he  may 
have,  consisting  of  private  estate  or  of  official 
domain,  or  of  both,  and  over  the  general  tribal  land 
he  has  a  general  administrative  authority,  which  is 
ever  growing  greater  over  that  portion  of  it  which 
is  unappropriated  waste.  He  is  meanwhile  the  mili- 
tary leader  of  his  tribesmen,  and,  probably  in  that 
capacity,  he  has  acquired  great  wealth  in  cattle.  It 
has  somehow  become  of  great  importance  to  him  to 
place  out  portions  of  his  herds  among  the  tribesmen, 
and  they  on  their  part  occasionally  find  themselves 
through  stress  of  circumstance  in  pressing  need  of 
cattle  for  employment  in  tillage.  Thus  the  chiefs 
appear  in  the  Brehon  law  as  perpetually  '  giving 
stock,'  and  the  tribesmen  as  receiving  it.  The 
remarkable  thing  is,  that  out  of  this  practice  grew, 
not  only  the  familiar  incidents  of  ownership,  such  as 
the  right  to  rent  and  the  liability  to  pay  it,  together 
with  some  other  incidents  less  pleasantly  familiar  to 
the  student  of  Irish  history,  but,  above  and  besides 
these,  nearly  all  the  well-known  incidents  of  feudal 
tenure.  It  is  by  taking  stock  that  the  free  Irish 
tribesman  becomes  the  Ceile  or  Kyle,  the  vassal  or 
man  of  his  chief,  owing  him  not  only  rent  but  service 
and  homage." 

Upon  the  very  surface  of  this  description  it  is 
palpable  that  the  chieftain  gave  up  no  enjoyment 
when  he  hired  out  these  cattle  ;  he  doubtless  kept 
quite  enough  fully  to  feed  himself  with  all  his  people, 
and  after  that  he  wanted  no  more.  The  power  and 
place  he  gained  by  this  quasi  feudal   use  of  them 


220  Economic  Studies. 


were  the  keenest  kinds  of  pleasure  then  possible 
to  him. 

"Cattle"  fill  so  subordinate  a  place  in  English 
industry  that  many  English  writers  evidently  never 
think  of  them  when  they  speak  of  capital;  they  have 
in  their  minds  the  machines  which  they  see ;  and 
they  forget  that  once  men  bred  capital  more  than 
they  made  it.  Yet  not  only  are  cattle  and  capital, 
of  course,  etymologically  the  same  word,  but  cattle 
fill  a  very  curious  place  in  the  history  of  the  subject. 

First, — They  are  a  kind  of  capital  at  once  co- 
operative and  remunerative ;  they  can  be  used  either 
to  aid  labour  or  to  reward  it ;  they  are  both  helps  to 
industry  and  means  of  pleasure.  Their  vital  force  is 
the  best  of  early  machines,  and  their  milk  and  their 
flesh  are  the  greatest  of  primitive  luxuries.  There 
is  scarcely  anything  which  primitive  labourers  more 
desire,  and  scarcely  anything  which  helps  them  so 
much.  And  it  is  very  curious  that  the  sort  of  capital 
which  first  bore  the  name,  and  etymologically  is  the 
beginning  of  all  the  rest,  should  be  a  link  between, 
and  combine,  the  nature  of  two  things,  now  so  dis- 
similar, that  at  first  it  hardly  seems  right  that  they 
should  have  the  same  name, — the  bread  which  the 
labourer  eats  and  for  which  he  works,  and  the  spindle 
or  the  loom  with  which  he  works. 

Secondly, — Cattle  unquestionably,  on  account  of 
this  double  desirability,  are  among  the  earliest  forms 
of  money,  probably  the  very  earliest  in  which  "  large 
transactions,"  as  we  should  now  speak,  were  settled. 
It  was  the  first,  or  among  the  first,  of  "  wholesale  " 
moneys. 


The  Growth  of  Capital.  221 


In  this  way,  though  English  PoHtical  Economy 
often  neglects  the  use  of  cattle  as  capital,  and  though 
some  of  its  doctrines  are  inapplicable  to  "  cattle  "  in 
the  primitive  condition  of  industry,  cattle  have  never- 
theless been  a  main  agent  in  creating  the  developed 
state  of  industry  in  which  English  Political  Economy 
was  thought  out,  and  to  which  alone  it  is  entirely 
applicable.  Cattle  rendered  possible  primitive  agri- 
culture, which  first  kept  men  close  together,  and  so 
made  the  division  of  labour  possible ;  were  the 
beginning  of  "  wages-paying  capital "  which  that 
"  division "  first  requires  and  then  extends ;  were 
among  the  first  things  hired,  and  the  first  money. 
We  should  be  careful  to  watch  in  this  single  article 
the  transitions  of  industry,  for  the  so  doing  may  save 
us  from  the  greatest  of  all  mistakes,  that  of  riveting 
as  a  universal  form  upon  all  societies  axioms  only 
fitting  societies  like  our  own. 

These  illustrations  might  be  multiplied  almost 
endlessly,  but  what  have  been  given  are  enough  to 
prove  that  capital  is  created  by  any  series  of  acts  by 
which  men  make,  or  bring  into  existence,  useful 
things,  and  that  only  some  of  these  acts  are  ac- 
companied by  abstinence,  while  others  are  not. 

Thirdly, — Neither  is  the  loan  of  capital  always 
accompanied  by  abstinence ;  it  may  or  may  not  be 
according  to  circumstances. 

If,  to  simplify  the  matter,  we  look  at  the  state  of 
things  which  is  going  on  around  us,  we  see  that 
capital  augments  in  this  way.  People's  incomes  are 
paid  in  money  ;  out  of  that  money  some  is  spent  on 


222  Economic  Studies. 


necessary  subsistence,  some  on  temporary  enjoyment, 
and  some  on  durable  means  of  comfort  ;  the  rest  is 
left  in  "  money,"  and  this  we  call  the  saving,  the  new 
"capital".  The  amount  of  it  depends  on  three  ele- 
ments, first,  and  evidently,  on  the  amount  of  the 
income  out  of  which  the  saving  is  to  be  made ; 
secondly,  on  the  degree  in  which  future  wants  pre- 
ponderate over  present  ones ;  and  lastly,  on  the 
efficiency  of  saving,  the  success  it  obtains. 

The  first  and  greatest  future  want  is  what  I  may 
call  the  "  old  stocking  "  one,  that  is,  the  craving  to 
have  some  stock  of  money  laid  against  the  unknown 
future.  The  strength  of  this  craving  differs  much  in 
various  races  of  men ;  and,  as  a  rule,  the  strong 
races,  used  to  prosperity,  have  much  less  of  it  than 
the  weak  ones  familiar  with  adversity.  You  will 
find  much  more  laid  up  in  the  cabin  of  an  Irish 
peasant  than  in  the  cottage  of  an  English  artisan, 
though  the  latter  has  five  times  the  greater  means. 
And  this  is  natural,  because  the  English  artisan 
believes,  and  probably  believes  with  truth,  that  he  is 
sure  to  be  able  to  earn  money;  whereas  the  Irish- 
man's notions  are  based  on  a  world  where  it  has 
often  been  impossible  to  earn  a  farthing,  and  in 
which  those  ready  to  live  even  on  potatoes  could  not 
get  potatoes  to  live  on.  Even  in  higher  life  very 
considerable  sums,  for  their  circumstances,  are  often 
saved  by  timid,  weak  people.  I  know  a  case  in 
which  a  sum  of  (I  think)  ;^I20  was  made  up  for  a 
gentleman  who  had  become  incapacitated  ;  he  enjo3'ed 
it  a  few  years,  and  when  he  died  from  ^^700  to  ;£'8oo 
were  found  in  his  room.     He  always  feared  that  his 


The  Growth  of  Capital.  223 

income,  or  part  of  it,  might  cease,  and  wanted  to  be 
able  to  live  if  it  did.  Against  all  contingent  evils 
this  "stocking"  fund  is  a  resource,  and  against  old 
age,  the  most  likely  of  those  evils.  The  next 
greatest — or  probably  an  equally  great — future  want 
is  the  desire  to  provide  for  the  next  generation. 
People  insure  their  lives  who  save  in  no  other  way. 
There  is  probably  no  greater  anxiety  in  the  world 
than  the  wish  of  parents  to  start  children  in  the 
same  level  of  life  in  which  they  started  themselves, 
and  few  greater  ambitions  than  to  start  them  on  a 
higher  level.  Lastly,  there  is  the  desire  to  be  rich, 
especially  in  countries  where  wealth  makes  the  man, 
where  it  not  only  buys  commodities,  but  where 
without  it  some  of  the  best  unbought  things — respect 
and  deference — are  not  easy  to  be  had.  I  need  not 
enumerate  the  present  wants  which  come  into 
collision  with  these,  nor  go  into  any  detail  as  to 
them. 

But  we  must  observe  what  is  incessantly  forgotten, 
that  it  is  not  a  Spartan  and  ascetic  state  of  society 
which  most  generates  saving.  On  the  contrary,  if  a 
whole  society  has  few  wants  there  is  little  motive  for 
saving.  The  reserve,  the  old  stocking  store  of  those 
who  want  little,  need  only  be  small.  Those  who 
want  to  start  their  children  with  little,  need  save 
little  ;  those  who  reckon  £"100  a  year  "riches,"  need 
not,  and  will  not,  deprive  themselves  of  anything  to 
obtain  more ;  a  state  of  society  which  encourages 
that  feeling  is  not  likely  to  be  rich.  Nothing  is 
commoner  than  to  read  homilies  on  luxury,  because 
it  is  a  "waste  of  money,"  and  "bad  for  the  poor". 


224  Economic  Studies. 

But  without  the  multifarious  accumulation  of  wants 
which  are  called  luxury,  there  would  in  such  a  state 
of  society  be  far  less  saving  than  there  is.  If  you 
look  at  the  West-end  of  London  with  its  myriad 
comforts  and  splendours,  it  looks  at  first  sight  like  a 
mere  apparatus  for  present  enjoyment.  And  so  far 
as  the  present  feelings  of  those  who  live  there  go,  it 
often  is.  Very  many  of  the  inhabitants  are  thinking 
only  of  themselves.  But  there  is  no  greater  benefit 
to  the  community  for  all  that  than  this  seemingly 
thoughtless  enjoyment.  It  is  the  bait  by  which  the 
fish  is  caught ;  it  is  the  attraction  by  which  capital 
is  caught.  To  lead  a  bright  life  like  that,  at  least 
that  their  children  may  lead  it  or  something  like  it, 
many  times  as  many  as  those  who  now  live  it,  spare 
and  save.  And  if  it  be  good  for  the  poor  that  capital 
should  be  saved,  then  the  momentary  luxury  which 
causes  that  saving,  is  good  for  the  poor.  The 
analogy  of  animal  life  is  reversed,  for  it  is  the  butter- 
fly which  begins  as  the  grub. 

On  the  other  side  we  must  remember  what,  in 
books  of  Political  Economy,  is  sometimes  forgotten, 
that  saving  is  not  necessarily  good.  The  capital 
may  come  too  dear.  A  clergyman  who  gives  his 
children  a  good  education,  does  more  really  to  in- 
crease wealth,  not  to  say  anything  of  anything  else, 
than  if  he  saved  the  money.  The  engineer,  the 
lawyer,  the  physician,  are  in  their  various  ways 
productive  people ;  and  the  nation  would  have  been 
poorer,  not  richer,  if  their  father  had  kept  the  money 
which  educated  them,  in  order  to  leave  them  at  his 
death   so  much    more.     The  same   may  not   be  so 


The  Growth  of  Capital.  225 

conspicuously  true  of  the  daughters,  but  it  is  as 
much  so  really.  A  good  mother  of  a  family  causes 
more  wealth  than  half  the  men,  for  she  trains  from 
the  beginning  boys  to  be  fit  for  the  world,  and  to 
make  wealth ;  and  if  she  fails  at  that  beginning  the 
boys  will  be  worse  gold  finders  all  their  lives. 

It  must  be  observed,  too,  that  there  is  an  intel- 
lectual element  in  the  matter.  Besides  the  two 
kinds  of  wants,  future  and  present,  there  is  the 
faculty  of  making  the  comparison.  And  the  habits 
of  some  people's  lives  fit  them  much  more  for  this 
than  those  of  others.  An  actor  who  is  concerned 
with  the  momentary  impression  on  passing  audiences 
has  nothing  to  bring  the  future  close  to  him  at  all. 
An  artisan  has  little  more ;  his  daily  work  passes 
with  the  day.  But  a  capitalist  in  business  has  the 
future  for  ever  brought  home  to  him.  He  has  to 
look  into  the  future,  perhaps  a  distant  one,  for  the 
profit  on  the  goods  which  he  buys,  and  to  find  in 
the  near  future  the  money  with  which  these  goods 
are  to  be  paid  for.  The  first  thing  in  his  mind  is 
a  list  of  "acceptances"  soon  to  be  provided  for; 
the  next  is  the  balance-sheet  to  be  made  up  some- 
time hence.  A  banker,  above  all  men,  incessantly 
lives  in  the  future.  He  is,  or  ought  to  be,  for  ever 
thinking  how  he  should  pay  his  deposits  if  he  were 
asked  for  them  ;  he  must  think  daily  how  he  will 
find  means  for  the  current  demands  of  every  day. 
He  too  has  a  balance-sheet  to  be  looked  to  upon 
the  results  of  which  he  will  have  to  live.  A  man 
thus  living  in  the  future,  has  a  greater  disposition 
to  provide  for  it.     And  this  is  the  one  main  reason 

15 


226  Economic  Studies. 

why  the  man  of  business,  of  whatever  species — the 
manufacturer,  the  merchant,  or  the  banker — will 
save  much  more  than  any  kind  of  person  who  lives 
upon  the  fruits  of  a  momentary  skill  or  talent. 

In  many  minds  this  feeling  coalesces  with  the 
"  old  stocking  want  " — that  is  to  say,  the  desire  to 
provide  for  definite  engagements,  those  engagements 
being  an  incessant  series,  passes  into  and  is  blended 
with  the  desire  to  provide  for  the  unknown.  The 
pecuniary  classes  have  a  general  feeling  of  "liability" 
about  their  minds  to  which  other  classes  are  strangers. 
And  justly,  because  their  risks,  not  only  their  known, 
but  their  unknown  ones,  are  greater.  I  once  heard 
a  very  experienced  man  lay  down  this  principle : 
"A  man  of  business,"  he  said,  "ought  not  to  be 
over  cautious ;  he  ought  to  take  what  seem  good 
things  in  his  trade  pretty  much  as  they  come  ;  he 
won't  get  any  good  by  trying  to  see  through  a  mill- 
stone. But  he  ought  to  put  all  his  caution  into  his 
'  reserve  fund ' ;  he  may  depend  on  it  he  will  be 
'  done '  somehow  before  long,  and  probably  when 
he  least  thinks  it ;  he  ought  to  heap  up  a  great 
fund  in  a  shape  in  which  he  can  use  it,  against  the 
day  at  which  he  wants  it."  It  is  the  disposition  so 
generated,  which  is  in  a  trading  nation  among  the 
strongest  motives  to  save. 

Besides  these  two  factors  in  the  growth  of  capital, 
the  amount  of  the  income  out  of  which  saving  has 
to  be  made,  and  the  disposition  to  sacrifice  what  is 
present  to  what  is  future,  there  is,  I  have  said,  a 
third,  viz.,  the  efficiency  of  saving  in  creating  capital. 
There  is  a  whole   scale  of  various  degrees   of  this 


The  Growth  of  Capital,  227 

efficiency  in  actual  life.  At  the  bottom  is  the  brisk 
peasant  who  puts  away  his  money  into  an  old  stock- 
ing, who  has  no  means  of  employing  it,  who  will 
not  trust  any  one  else  with  it.  Here,  all  that  the 
saving  of  ;£'io  will  produce  is  ^10 ;  it  is  sure  never 
to  get  any  more.  At  the  top  of  the  scale  is  the  able 
capitalist  in  a  large  and  growing  business ;  every 
penny  he  can  put  into  it  yields  him  a  high  profit, 
because  he  gets  an  income  from  unusual  ability, 
unusual  opportunity,  as  well  as  the  common  rate. 
Such  a  man  will  almost  always  save  more  than 
others,  because  he  has  a  far  greater  reward  per  cent, 
for  saving  it.  The  rate  of  profit  depends  on  the 
efficiency  of  industry.  When  more  is  made  at  less 
cost,  the  profit  is  greater ;  when  less  at  greater,  the 
profit  is  less.  I  am  not  sure  whether^  to  many 
minds,  this  language  will  not  present  a  difficulty. 
I  know  it  long  did  so  to  my  own.  I  was  conscious 
of  a  haze  about  it.  "  It  is  stated,"  I  said  to  myself, 
"  that  there  is  '  more  '  of  something  or  other,  but  of 
what  is  there  more  ? ""  And  I  could  not  answer  the 
question  very  well.  More  "  exchangeable  value," 
more  "  money's  worth,"  were  the  natural  answers, 
but  I  was  not  satisfied  that  they  were  the  complete 
ones.  We  must  analyse  a  little  further.  The 
easiest  case  to  analyse  is  the  gold-mining,  the 
money-making  business.  If  10,000  sovereigns  are 
invested  in  gold-mining — in  paying  wages,  in  buying 
machinery,  and  in  accompanying  expenses — and  if 
that  produce  per  annum,  gold,  which  can  be  made 
into  £11,000,  this  measures  the  rate  of  profit  in  the 
country.     If  the  efficiency  of  industry-  were  less,  so 


228  Economic  Studies. 

many  additional  sovereigns  would  not  be  produced  ; 
if  more,  a  proportionately  greater  number  would  be 
produced.  In  the  profit  of  all  trades  there  is  the 
same  fundamental  fact;  an  addition  to  the  "ex- 
changeable value"  of  the  commodities  of  a  country  ; 
but  in  the  profit  of  the  gold-mining  business  we  can 
see  that  fact  most  easily,  because  we  can  take  the 
capital  before  it  is  invested  as  so  much  gold,  and  it 
comes  back  as  that  much,  plus  some  more.  In  other 
cases  there  is  a  change  necessary  into  money,  in 
this  case  the  profit  palpably  results  from  the  mere 
production. 

We  must  observe,  however,  that  this  profit  in  the 
gold-mining  trade  is  only  a  measure  of  the  general 
rate  of  profit  in  the  country,  and  of  the  general  effici- 
ency of  industry  which  causes  that  rate  ;  it  has  no 
peculiarity  about  it,  except  that  which  has  been  said. 
If  the  profit  in  this  trade  were  more  than  in  any 
other,  capital  would  go  thither,  the  production  of  gold 
would  augment,  and  prices,  measured  in  gold,  would 
rise.  This  would  raise  the  price  of  gold-mining 
machinery,  the  rate  of  gold-miners"  wages,  and  all  the 
incidental  out-goings  of  the  trade.  And,  as  the 
number  of  sovereigns  which  that  "machinery"  and 
those  "miners"  could  produce  is  not  increased,  the 
profit  in  the  trade  will  fall.  And  the  reverse  will 
happen  if  that  profit  be  less.  A  contrary  series  of 
changes  will  make  it  rise. 

In  a  country  in  which  the  productive  arts  are  high, 
other  things  being  equal,  profits  will  be  high  also. 
If  the  outlay  of  the  capitalist  on  all  means  of  produc- 
tion is  the  same,  his  remuneration  will  be  greatest 


The  Growth  of  Capital.  229 

where  more  is  produced.  Suppose  by  a  sudden 
series  of  inventions  the  productive  power  of  industry 
were  augmented  in  all  trades  ten  per  cent,  (including 
the  gold-mining  trade,  so  that  we  may  be  clear  of  all 
questions  as  to  money  and  price),  the  revenue  of  the 
capitalist  would  be  augmented  by  that  ten  per  cent., 
on  condition  of  course  of  his  outlay  in  all  ways  re- 
maining the  same,  including  that  on  wages ;  and  his 
power  of  saving  would  be  augmented  equally. 

Single  sudden  inventions  which  help  in  everything, 
do  not  happen,  but  the  general  progress  of  the  pro- 
ductive arts  in  the  last  thirty  years  has  been  very 
like  it,  as  far  as  effects  go.  Almost  everything  has 
been  made  more  easily  ;  many  things  far  more  easily. 
Even  the  growth  of  raw  produce  for  sale  has  been 
facilitated,  if  not  as  much  as  some  other  things,  yet 
still  very  much.  Railways  have  made  land  which 
was  far  from  the  market  able  to  compete  with  that 
near  it.  The  daily  subsistence  of  such  a  city  as 
London  would  have  been  excessively  costly  in  the 
pre-railway  time,  perhaps  it  would  have  been  impos- 
sible. The  amount  of  things  produced  on  purpose 
to  be  exchanged  now,  as  compared  with  fifty  years 
ago,  is  so  much  increased  that  our  fathers  would  not 
have  comprehended  it  or  believed  it.  The  rise  of 
prices  would  have  been  enormous,  if  the  same  exten- 
sion of  productive  power  had  not  extended  to  the 
money  trades,  to  gold  and  silver.  For  many  years 
before  1840  the  production  of  these  metals  had  been 
excessively  slow,  and  their  value  was  rising.  Mr. 
Jevons  thinks  "  that  prices  had  on  the  average  fallen 
between  the  years  1820  and  1844  in  the  ratio  of  103 


230  Economic  Studies. 


to  69,  or  by  ss  P^^*  cent.,  whereas  between  1844  ^md 
1857  they  rose  in  the  ratio  of  69  to  85,  or  by  about 
23  per  cent.".^  Thus  the  effect  of  the  great  gold 
discoveries  consisted  more  in  arresting  the  previous 
continuous  appreciation  of  the  precious  metals  than  in 
causing  a  positive  depreciation.  Indeed,  in  1863, 
Mr.  Jevons  stated  the  depreciation  of  gold  at  the 
very  moderate  amount  of  13  to  16  per  cent.^ 

If  the  increase  in  the  productive  power  of  general 
industry  had  come  upon  an  age  straitened  as  to 
money-making  industry,  the  fall  of  prices  would  have 
been  such  as  we  have  no  example  of,  and  the  effects 
would  have  been  harassing  and  confusing.  But 
fortunately  the  production  of  gold  and  silver  has  been 
even  more  facilitated  than  that  of  most  other  things. 
There  has  been  no  such  confusing  fall  of  prices,  as, 
except  for  the  new  discoveries  of  gold  in  California 
and  Australia,  there  would  have  been.  The  effect  of 
the  productiveness  of  industry  has  been  greatly  to 
retard  and  almost  to  prevent  the  equally  confusing 
rise  of  prices,  which  would  otherwise  have  happened. 
The  productive  power  of  men  of  business  has  thus 
been  incalculably  augmented,  and  with  that  their 
saving  power. 

The  second  main  source  of  capital  in  the  present 
day  is  the  saving  of  men — of  persons  out  of  business. 
Such  persons  not  being  able  to  make  anything  them- 
selves must  put  such  part  of  their  income  as  they 
wish  to  save  into  the  hands  of  others,  and  far  the 
most  important  wa}-  in  which  they  do  this  is   by 

^Journal  of  the  London  Statistical  Society,  vol.  x.wiii.,  p.  315. 
^Serious  Fall  in  the  J'alue  of  Gold,  etc.,  p.  30. 


The  Growth  of  Capital.  231 

lending.  They  lend  it  on  interest,  and  what  they 
can  save  varies,  other  things  being  the  same,  with 
that  interest.  What  then  will  that  amount  be  ? 
This  is  determined  as  other  market  prices  are  de- 
termined.^ 

The  most  important  factors  in  fixing  it  are  the 
amounts  of  money  to  be  lent,  and  the  amounts  which 
borrowers  are  willing  to  borrow  upon  such  security  as 
the  lenders  are  willing  to  accept.  The  most  important 
of  these  borrowers  are  men  of  business.  These  will 
be  most  anxious  to  borrow  money  when  the  rate  of 
profit  is  high,  and  when,  therefore,  they  can  employ 
it  to  the  most  advantage  ;  at  such  times  they  will 
strain  every  nerve  to  obtain  as  much  as  possible. 
But  in  the  earlier  states  of  industry  they  have  great 
difficulty  in  obtaining  it.  They  have  no  security 
which  will  satisfy  those  who  wish  to  lend.  In  such 
epochs,  the  only  sort  of  "  security,"  the  only  way  in 
which  the  borrower  can  make  the  lender  sure  of  his 
money,  is  by  depositing  with  him  fixed  property,  or 
at  least  giving  him  the  control  over  it.  He  must 
pledge  movables,  or  transfer  the  indicia  of  ownership 
over  immovables.  But  in  such  a  commercial  civilisa- 
tion as  ours,  there  is  an  immense  and  very  powerful 
machinery  for  conducting  the  money  of  the  ac- 
cumulating class  into  the  hands  of  the  using  class. 
Bankers  and  bill-brokers  form  a  class  whose  business 
it  is  to  know  the  credit  of  different  persons,  and  to 
say  when  and  how  far  they  singly,  or  together,  can 
be  trusted.  Millions  are  lent  in  this  country  upon 
bills  of  exchange  with  only  two  signatures — that  is 
'See  Note  A  on  Market  Price  at  the  end  of  the  volume. 


232  Economic  Studies. 

upon  an  order  to  pay  money  accepted  by  the  person 
to  whom  it  is  addressed,  and  which  the  person  who 
gives  the  order  engages  to  pay  if  the  other  does  not. 
The  money  is,  therefore,  in  fact,  advanced  on  an 
estimated  probability  that  one  or  other  of  these  two 
persons  will  pay,  of  which  the  skilled  advancing  class 
— the  bankers  and  the  bill-brokers — form  their  judg- 
ment. We  are  so  familiar  with  it  that  we  forget 
how  marvellous  it  is.  But  probably  our  modern 
civilisation,  notwithstanding  its  railways,  telegraphs, 
and  other  like  things,  has  nothing  similar.  That  an 
endless  succession  of  slips  of  written  promises  should 
be  turned  into  money  as  readily  as  if  they  were 
precious  stones,  would  have  seemed  incredible  in 
commerce  till  ver^'  recent  times.  Our  ancestors 
would  have  understood  that  something  like  it  might 
happen  with  the  promises  of  a  few  millionaires  or 
Governments,  but  they  would  have  never  thought  it 
possible  that  such  an  infinity  of  names  could  be 
known,  or  promises  estimated.  And  the  wonder  is 
greater  because  they  are  not  estimated  equally ;  the, 
relative  possibility  of  different  "  parties  "  not  paying 
is  materially  determined  to  the  minutest  gradations; 
and  a  bill  is  done  at  3|-  or  4  per  cent,  accordingly. 
The  intermediate  dealers  —  the  bill-brokers  and 
bankers — live  upon  this  knowledge  ;  they  gain  if  they 
are  right,  and  are  ruined  if  they  are  often  much 
wrong ;  and,  therefore,  they  are  right.  Through 
these  expedients  an  immense  tideof  money  flows  into 
commerce  at  most  times,  though  occasionally  they 
are  impaired,  and  it  is  impeded. 

Our  commercial  civilisation  also  tends  more  and 


The  Growth  of  Capital.  233 

more  to  improve  the  means  by  which  actual  property 
can  be  pledged.  The  indicia  of  ownership  are  made 
more  easily  transferable.  The  English  law  of  real 
property  does  not  bear  a  very  good  reputation,  but 
it  is  indisputable  that  in  this  respect  it  is  more 
advanced  than  any  similar  law  in  the  world.  In  the 
last  century  the  Courts  of  Equity  decided  that  the 
deposit  of  title-deeds  with,  or  even  without,  a  written 
memorandum  was  an  adequate  security  for  a  loan. 
And  on  this  sort  of  "equitable"  mortgage  a  very  large 
sum  is  lent  for  short  periods,  especially  by  country 
bankers,  who  know  the  people  to  whom,  and  the 
land  on  which,  they  are  lending.  Most  individual 
transactions  of  this  sort  are  small,  but  the  sum  total 
is  very  great.  Dock  and  warehouse  warrants  for 
goods  deposited  are  also  fruits  and  indications  of  a 
highly  improved  commercial  state.  They,  and  all 
similar  means  of  pledging  property,  tend  to  augment 
the  borrowing  power  of  men  of  business,  and  so  to 
raise  the  rate  of  interest. 

Besides  men  of  business,  who  borrow  in  order  to 
make,  a  large  class  of  people  borrow  in  order  to  hold. 
The  pride  and  pleasure  of  possessing  property  are  so 
great  that  people  will  very  often  pledge  that  property 
in  order  to  obtain  it.  A  large  part  of  the  titles  of  our 
richest  landowners  are  mortgaged  in  this  way  to 
"insurance  offices,"  who  have  much  money  con- 
stantly to  lend.  The  arrangement  suits  both  parties, 
for  no  one  knows  of  the  loan ;  as  the  insurance 
office  is  permanent,  the  loan  is  rarely  called  in,  and 
thus  the  landowner  gets  the  pomp  of  ownership, 
while  the  office  enjoys  the  perfection  of  a  security. 


234  Economic  Studies. 

There  is  also  a  class  of  persons  who  borrow  in 
order  to  spend,  that  is,  to  spend  the  principal  (for  all 
borrowers  spend  the  interest,  else  they  would  not 
want  to  borrow).  In  such  countries  as  England, 
where  the  producing  and  the  preserving  classes  are 
such  large  borrowers,  the  demand  of  spendthrifts  has 
but  little  influence  on  the  rate  of  interest.  It  is 
overpowered  by  the  comparative  greatness  of  other 
demands.  But  in  simpler  states  of  society  the 
demand  of  the  "prodigal"  fills  a  conspicuous  place 
in  the  money  market,  and  in  some  of  the  books 
which  have  come  down  to  us  from  those  early  times 
he  seems  the  principal  borrower  that  is  thought  of 
But  the  growth  of  civilisation,  though  diminishing 
this  species  of  spending  borrowers,  creates  another 
much  more  efficient  species.  Governments  obtain  a 
vast  credit,  and  borrow  for  war  and  other  non- 
productive purposes,  such  as  in  the  early  history  of 
mankind  could  never  have  been  imagined.  The  loss 
of  France  by  individual  "prodigals"  will  not,  for  ages, 
be  as  great  as  her  loss  by  the  folly  of  the  seven 
months'  war  with  Germany.  This  is,  of  course,  so 
much  to  be  deducted  from  the  capital  of  the  country, 
but  nevertheless  the  sum  so  borrowed  tends  to  raise 
the  rate  of  interest,  and  thus  to  augment  the 
means  of  future  saving  by  those  who  wish  to 
save. 

At  the  present  day,  therefore,  the  amount  of 
saving  in  a  nation  depends,  as  we  have  seen,  on  the 
amount  of  the  annual  income  out  of  which  saving  is 
to  be  made.  The  disposition  to  save  out  of  it 
(varying  in  different  classes),  and  the  efficiency  of 


The  Growth  of  Capital.  235 

saving,  in  creating  new  capital,  depend  partly  on 
the  rate  of  profit  and  partly  on  the  rate  of  interest. 
And  from  this  saving  arises  the  annual  increment  of 
capital — the  amount  of  yearly  addition  to  it ;  but 
there  is  also  a  yearly  decrement — an  annual  waste. 
The  amount  of  this  depends  in  such  a  country  as 
England  mainly  on  the  amount  of  unsuccessfulness, 
of  absolute  loss  in  business.  Certain  adventures  not 
only  bring  no  profit,  but  never  return  the  capital 
spent  on  them.  The  liabilities  of  bankruptcy  estates 
in  England,  including  liquidations  and  composi- 
tions, but  excluding  public  companies,  in  1870  were 
;f  17,456,000  ;  the  apparent  assets  were  £5,382,000  ; 
the  difference  therefore,  or  ;/^i2,o74,ooo,  was  so 
much  pure  loss.  x\nd  there  is  much  other  loss  in 
business  which  does  not  figure  here. 

To  this  must  be  added  the  loss  in  such  a  country 
and  age  as  ours — usually  loss  by  private  prodigals 
and  by  State  follies.  If  we  could  only  know  the 
amount  of  the  diminutions  and  augmentations  in 
any  nation,  could  deduct  the  one  from  the  other,  we 
should  know  the  increase  of  the  capital  during  this 
time  by  that  nation. 

We  must  be  careful,  however,  to  observe  that  our 
account  of  the  growth  of  capital  is  only  applicable  to 
such  times  as  ours— to  times  when  the  division  of 
labour  has  been  carried  out,  and  where  almost  every- 
thing is  produced  by  one  man  for  sale  to  others. 
The  result  of  this  is  that  every  sale  changes  a  man's 
product  into  a  form  in  which  he  has  the  choice  of 
saving  or  not  saving  it.  The  money  which  is  the 
proceed  of  the  sale  may  either  be  spent  on  immediate 


236  Economic  Studies. 

enjoyment,  or  set  aside  in  some  way  for  the  future. 
The  incomes  of  men  are  in  an  adult  economic  society 
received  in  an  optional  medium.  But  in  early 
societies  this  is  not  so.  Things  not  being  produced 
for  sale  are  only  what  they  are  by  nature ;  there 
is  no  choice  in  the  way  of  using  most  of  them  ; 
they  are  by  their  essential  character  either  fit  for 
present  use,  or  fit  to  be  set  apart  for  the  future. 
They  are  very  rarely  in  the  same  degree  fit  for  both. 
Defoe  illustrates  this  better  than  many  graver 
authors. 

Our  account  of  the  growth  of  capital  also  assumes 
that  men  can  always  find  something  to  save  in,  that 
a  person  who  wants  to  provide  for  his  future  wants, 
can  do  so  if  he  will  give  up  present  ones.  But  this 
is  not  true  in  early  times  at  all.  Most  primitive 
wants  are  for  rapidly  perishable  things ;  and  it  is  of 
no  use  to  keep  a  store  of  those  things.  If  you  do, 
you  will  be  "  keeping  stale  fish,"  you  will  have 
sacrificed  the  present  without  obtaining  the  future ; 
you  will  have  that  which  was  of  use  once,  but  now 
is  so  no  longer.  "Food"  is  the  greatest  want  of 
early  times.  But  most  food — vegetable  or  animal — 
will  not  of  itself  last  long.  It  is  of  no  use  for  a  tribe 
of  hunters  to  set  aside  the  game  they  kill.  It  is  not 
till  the  pastoral  age  has  arrived  that  men  have  any 
means  of  storing  up  the  food  they  require.  The 
first  "granaries"  of  men  were,  if  the  phrase  be 
allowed,  "  live  granaries " ;  the  flocks  and  herds 
which  walked  the  fields,  and  could  be  left,  when  not 
wanted  to  be  slaughtered,  where  they  were.     Clothes, 


The  Growth  of  Capital.  237 

the  second  great  want  of  man,  are  always  short-lived, 
and  it  is  not  much  use  to  store  them  up.  There 
was,  in  early  times,  no  mode  of  supplying  those 
wants  for  the  future ;  men  had  to  live  from  hand  to 
mouth. 


338 


COST  OF  PRODUCTION. 

I. 

Many  persons  are  much  puzzled  by  the  phrase  ex- 
changeable value — not  only  outsiders  and  learners, 
but  even  practical  thinkers  on  the  subject  use  it 
awkwardly,  and  do  not  feel  that  the  idea  is  vivid 
in  their  minds.  And,  if  we  look  at  the  matter 
historically,  it  is  very  natural  that  this  should  be 
so.  No  nation — no  set  of  persons — who  did  not 
possess  a  fixed  and  efficient  money  ever  attained 
the  idea.  Nations  which  only  use  barter  know  that 
a  certain  amount  of  one  or  two  common  things 
mostly  exchanges  for  a  certain  amount  of  one  or 
two  other  things ; — but  they  have  no  conception  of 
the  "  value  "  of  one  thing  as  against  all  other  things. 
This  idea  is  only  gained  by  the  use  of  money  as  a 
general  common  measure.  By  measuring  all  things 
— not  one — against  one,  men  come  to  be  able  to 
measure  them  against  one  another.  "  Price  " — price 
in  money — is  the  foundation  of  the  economic  idea  of 
exchangeable  value.  But  though  it  is  the  founda- 
tion of  that  idea,  it  is  not  the  whole  of  it.  "  Money" 
is  a  commodity  like  any  other,  and  it  tends  to  fluc- 
tuate in  the  ratios  in  which  it  exchanges  with  other 
commodities,  from  chances  affecting  itself,  just  as 
they  do  in  relation  to  it.  At  any  single  moment 
if  you  know  the  "prices'"  of  all  articles,  you  know 


Cost  of  Production.  239 

their  relative  exchangeable  value.  But  when  you 
come  to  compare  one  time  with  another — say,  the 
prices  of  to-day  with  those  of  this  time  last  year — 
you  might  be  much  puzzled,  for  possibly  all  might 
have  risen,  or  all  might  have  fallen.  And  this 
would  have  arisen  not  from  anything  which  related 
to  the  things  measured,  but  from  something  affect- 
ing the  measuring  instruments.  What  we  mean  by 
exchangeable  value  in  Political  Economy  is  not 
actual  price,  but  perfect  price, — the  ratio  in  which 
everything  exchanges  against  all  other  things — 
measured,  not,  as  it  is,  by  the  intrinsically  valuable 
measure  of  money,  but  as  it  would  be  against  a 
similar  measure  which  was  invariable  intrinsically. 

We  must  bear  in  mind  that  on  no  two  days, 
indeed  at  no  two  minutes,  are  the  rates  at  which 
things  exchange  for  one  another  at  all  the  same. 
The  price  list  of  the  Stock  Exchange  varies  from 
hour  to  hour,  and  so  do  the  prices  in  other  markets. 
General  "exchangeable  value,"  which  is  the  sum 
total  of  price  lists,  is,  therefore,  incessantly  altering. 
The  fact  which  it  denotes  is  one  of  the  greatest 
complexity  with  which  any  science  can  have  to  deal, 
and  it  is  no  wonder,  therefore,  that  most  imagina- 
tions find  it  hard  to  get  and  keep  a  hold  of  it. 
Incomparably  the  best  way  to  aid  them  in  this,  is 
to  make  an  hypothesis,  and  to  assume  that  money 
is  of  invariable  value.  Of  course  this  is  an  hypo- 
thesis not  coinciding  with  fact.  On  the  contrary, 
it  leaves  out  a  whole  range  of  facts.  But  if  we  are 
careful  with  it — if  we  remember  what  are  the  omitted 
facts,  and  make  corrections  for  them  if  necessary — 


240  Economic  Studies. 

the  hypothesis  is  of  the  greatest  use.  The  figures 
of  price  are,  in  this  case,  like  the  symbols  of  Algebra  ; 
they  hedge-in  the  mind  to  a  definite  thought. 

But  as  a  matter  of  fact,  in  markets,  though  mone- 
tary changes  of  price  are  incessant,  yet  general  re- 
lations are  constant ;  and  in  a  former  page  we  saw 
that  in  relation  to  articles  which  human  industry  can 
indefinitely  multiply,  and  which  it  does  so  multiply 
for  the  hope  of  profit,  and  within  a  "nation"  in 
the  economic  sense — that  is,  a  group  of  producers 
within  which  labour  and  capital  freely  circulate — 
these  constant  relations  are  fixed  by  the  "cost  of 
production  ".  What,  then,  is  this  cost  accurately  ? 
It  is  in  relation  to  this  that  we  shall  find  the  hypo- 
thesis as  to  fixed  value  of  money  especially  useful 
All  other  modes  of  dealing  with  the  subject  are  apt 
to  leave  the  mind  of  the  reader  somewhat  dull  and 
stupid,  and  to  make  him,  though  convinced  at  each 
step  of  the  reasonings,  not  quite  sure  of  the  effect  of 
the  whole. 

This  cost  of  production  in  a  mature  state  of 
industry  and  where  there  is  a  strict  division  of 
persons  into  capitalists,  artisans,  and  labourers,  is 
the  cost  at  which  it  would  "pay"  a  capitalist  to 
produce  a  given  product,  and  the  word  "  pay  "  means 
that  he  must  have  his  "outlay,"  the  money  he  has 
expended,  returned  to  him,  and  that  he  must  have, 
over  and  above,  so  much,  by  way  of  profit — so 
much  "  to  the  good,"  as  we  commonly  speak — as 
will  induce  him  to  make  the  production.  Translated 
into  more  abstract  language,  you  can  say  that  the 
capitalist  must  be  in  possession,  or  have  the  means 


Cost  of  Production.  241 


of  possessing  himself,  of  certain  articles,  possessing 
exchangeable  value ;  that  those  articles  are  parted 
with,  or  destroyed  in  making  the  product,  and  that 
he  must  have  articles  of  equal  exchangeable  value 
returned  to  him  by  the  exchange  of  his  product, 
together  with  a  profit.  But  though  a  most  valuable 
way  of  speaking  for  some  purposes,  for  those  of 
common  exposition,  this  abstract  way  is  inferior 
to  the  more  concrete  way. 

A  great  deal  of  the  indistinctness  which  often 
hovers  round  the  subject  arises  because  those  who 
think  of  it  do  not  enough  trace  the  matter  as  it  runs 
through  the  mind  of  the  capitalist.  In  our  modern 
production  all  depends  on  him.  It  is  he  who  settles 
what  undertakings  shall  be  embarked  in,  and  what 
not ;  which  things  shall  be  made  and  which  left 
unmade.  The  price  at  which  a  thing  can  be  bought 
is  the  price  at  which  the  capitalist  will  undertake  to 
lay  it  down ;  if  you  want  to  know  why  one  thing 
is  cheap  and  another  dear,  you  must  analyse  in  each 
case  the  calculations  of  the  capitalist. 

The  first  and  most  obvious  thing  which  a  capitalist 
must  do,  is  to  pay  his  wages.  Labour — the  muscular 
and  mental  force  of  man — is  a  main  element  in 
almost  all  kinds  of  production,  and  the  principal  one 
in  many.  But  we  must  be  careful  not  to  imagine 
that  this  labour  which  the  capitalist  purchases  is  one 
thing.  It  is  hardly  even  one  kind  of  thing.  The 
labour  of  a  ploughman  is  distinct  from  that  of  a 
clerk ;  that  of  a  clerk  from  that  of  an  engine-driver ; 
that  of  an  engine-driver  from  that  of  a  cabinet- 
maker,   and    so   on   without    end.       The    difference 

16 


242  Economic  Studies. 

between  these  various  kinds  of  labour  is  in  a  great 
degree  the  consequence  of  acquired  habit.  Each 
man  is  trained  in  his  department,  and  in  it,  there- 
fore, he  acquires  a  skill.  These  various  kinds  of 
training  go  down  to  very  low  degrees — to  the  "navvy," 
who  just  knows  how  to  dig  out  plain  earth, — and 
runs  up  to  the  most  accomplished  artisan — the 
maker  of  astronomical  instruments  (say)  who  can 
turn  out  work  of  the  finest  and  most  minute 
accuracy,  and  to  a  great  extent  knows  how  he  does 
it,  and  how  that  accuracy  is  acquired.  There  is  a 
common  coarse  sort  of  human  nature  which  can  be 
taken  a  certain  way  in  any  pursuit,  but  which  will 
not  go  very  far ;  and  over  and  above  that,  there  is 
a  finer  element  which  can  only  be  taken  in  one 
direction,  or  some  few  directions  for  which  it  has 
an  affinity,  and  which  is  often  accompanied  by  an 
incompetence  to  go  even  the  first  step  in  many 
others.  Out  of  these  natures  specifically  inclined 
to  it,  each  trade  gets  its  best  labourers.  The  capi- 
talist in  each  line  has  to  try  the  various  sorts,  if  he 
can  get  them,  and  to  pay  higher  for  the  finer  sorts. 
I  say,  if  he  can  get  them,  because  a  main  key  to  the 
reason  why  industries  are  distributed  apparently  so 
capriciously  over  the  face  of  the  country,  is  to  be 
found  in  the  power  of  being  able  to  buy  easily  and 
cheaply  all  the  kinds  of  labour  which  each  kind  of 
trade  wants.  In  a  place  where  a  trade  has  long 
been  carried  on,  all  these  tend  to  accumulate ;  a 
family  tradition  carries  them  on  from  father  to  son, 
and  the  whole  mind  of  the  place  comes  to  be  full  of 
it.     The  lanecua^e  of  the  district  soon  assumes  that 


Cost  of  Produciion.  243 


you  know  it,  and  those  who  do  not  are  a  kind  of 
aliens.  "As  water"  in  all  cases  "comes  to  the 
river,"  so  the  place  where  a  trade  has  long  been 
carried  on  tends  to  attract  those  who  by  nature 
like  that  trade,  and  feel  that  they  are  fitted  for  it. 
Thus  commerce,  which,  being  wholly  of  human 
creation,  one  might  have  fancied  to  be  very  mutable, 
is  really  a  thing  most  conservative.  It  will  stay  in 
a  place  for  very  many  years  which  has  given  no 
natural  facility  to  it, — often  which  seems  to  have 
interposed  a  difficulty.  To  get  all  the  kinds  of 
skill  suitable  for  a  trade  in  their  proper  proportions 
is  a  long  task,  requiring  many  years ;  a  new  place 
cannot  have  it  for  a  long  time,  and  an  old  place 
for  a  long  time  will  be  superior  in  this  cardinal 
advantage. 

One  special  kind  of  labour  which  almost  every 
capitalist  must  have  more  or  less  of,  is  what  we  call 
his  "establishment";  that  is,  his  head  men  who 
transmit  his  orders,  or  give  them  to  his  corresponding 
clerks ;  his  book-keeping  clerks,  who  keep  what  we 
may  call  his  "  memory " ;  and  the  result  of  their 
labour  shows  what  has  become  of  his  capital,  and 
whether  he  is  getting  or  losing.  In  some  trades,  as 
in  banking,  and  some  other  distributive  trades,  this 
kind  of  charge  is  one  of  the  greatest ;  and  almost  all 
people  in  a  very  large  way  of  business  have  a  large 
staff  of  confidential  persons  whom  they  know  and 
who  know  them,  and  who  work  together  with  an 
efficiency,  though  often  incessantly  "  having  words," 
which  no  casual  gang  suddenly  collected  can  for  an 
instant  compete  with. 


244  Economic  Studies. 


Next,  a  capitalist  must  buy  his  "  machines  ".  And 
there  is  no  reason  to  take  up  time  and  space  with 
saying  how  various  and  wonderful  they  are  at  the 
present  day.  Everybody  will  remember  that,  without 
its  being  said.  What  is  much  more  to  our  present 
purpose  is  to  say  that  outlay  on  wages  has  a  different 
effect  on  the  price  of  commodities  from  an  outlay  on 
machinery.  If  ^^100,000  is  laid  out  during  the  year 
in  wages,  that  sum  must  all  be  returned  by  the  sale 
of  the  articles  produced  in  the  year.  But  that  is  not 
true  of  an  outlay  on  machinery.  On  the  contrary, 
;^ioo,ooo  laid  out  in  machinery  need  not  all  come 
back  so  soon.  The  machinery  will  last  for  years, — 
and  the  capitalist  does  not  want  to  have  the  first 
outlay  returned  to  him  till  the  very  end,  when  it  is 
quite  worn  out.  Money  spent  on  wages  is  a  lump 
sum,  which  the  products  of  the  year  must  return ; 
money  spent  on  machinery  a  sum  repayable  by 
terminable  annuity,  extending  over  all  the  years  the 
machine  lasts.  Each  cotton  shirting  must  by  its 
sale  recoup  the  capitalist  for  the  wages  spent  in 
making  it ;  but  it  need  only  return  to  him  a  small 
fraction  of  the  cost  of  the  machinery  by  which  it  was 
made,  because  that  machinery  will  go  on  making 
shirtings  for  many  years,  and  it  is  the  aggregate 
which  must  make  the  return  to  the  capitalist,  and 
not  any  one. 

Machine-making,  it  is  to  be  observed,  is  a  trade 
which  especially  tends  to  adhere  to  particular  places, 
because  more  than  any  other  trade  it  requires  the 
easy  and  cheap  supply  of  the  exact  kind  of  skilled 
labour  in  the  exact  quantity  in  which  it  is  wanted. 


Cost  of  Production.  245 

And  this  you  cannot  have  in  a  new  place.  A  machine- 
making  factory  which  would  thrive  at  Birmingham, 
would  starve  at  the  Land's  End. 

Next,  a  capitalist  must  mend  his  machinery ;  and 
this  is  the  most  conservative  force  of  all.  The 
number  of  subsidiary  trades  which  any  one  great 
manufacture  requires  merely  to  keep  its  plant  going, 
is  very  large,  and  in  out-of-the-way  spots  no  one  of 
them,  of  course,  exists.  They  only  grow  round  the 
principal  trade  gradually,  and  as  time  goes  on.  And 
manyof  them  are  subsidiary  to  several  trades.  The 
place,  therefore,  which  has  longest  had  possession  of 
such  trades  has  an  incalculable  advantage,  as  far  as 
this  item  is  concerned. 

Next,  the  capitalist,  having  bought  his  machinery, 
must  buy  the  power  of  moving  that  machinery.  And 
this  is  a  point  on  which  very  many  people  have  no 
clear  notions  ;  there  is  a  difficulty  in  comprehending 
the  difference  between  the  two, — a  disposition  to 
confound  force  and  wheels.  In  the  old  times  of 
watermills  and  windmills,  I  am  inclined  to  think 
that  the  distinction  was  clearer ;  it  was  then  patent 
that  the  most  elaborate  machinery  would  not  move 
unless  there  was  some  external  force  to  push  it.  But 
the  use  of  coal  has  rather  mystified  the  matter. 
People  do  not  see  the  pushing  power,  and  therefore 
they  do  not  believe  that  it  exists.  A  steam-engine  is 
so  large  and  complex  a  thing  that  people  in  general 
have  no  real  idea  how  it  moves.  The  truth  of  course 
is  that  the  burning  of  the  coal  heats  the  water,  that 
the  heating  of  the  water  causes  it  to  expand,  that 
this  expansion  gives  a  "shove,""  and  that  all  the  rest 


246  Economic  Studies. 


of  the  machine  only  transmits  and  passes  on  that 
"  shove ".  You  must  have  something  Hke  this  to 
start  with — something  that  will  produce  a  pressure, 
or  you  cannot  move  your  machinery  at  all.  I  have 
known  highly  experienced  men  of  business,  however, 
who  are  very  far  from  clear  about  this.  In  discussion 
as  to  the  consequences  of  the  extinction  of  our  "  coal," 
nothing  is  more  common  than  to  hear  it  said  :  "  Oh, 
then  we  must  adopt  new  forms  of  machinery  ".  You 
might  as  well  try  by  improving  and  educating  the 
mothers  to  continue  a  species  without  fathers.  There 
is  a  certain  motive  "  power "  in  nature  which  is  as 
essential  as  any  matter  to  be  moved. 

This  element  in  the  cost  of  production  tends  quite 
in  the  opposite  way  to  the  previous  ones ;  it  tends 
not  to  keep  trade  where  it  is,  but  to  make  it  move. 
The  best  coal  mines,  the  best  sources  of  power  of  all 
kinds  in  each  district,  are  soon  appropriated  and 
used.  The  natural  tendency  of  trade,  as  far  as  this 
element  in  the  cost  of  production  guides  it,  would  be 
to  move  incessantly  over  the  face  of  the  world, 
always  touching  the  best  sources  of  power  only — the 
quickest  water-courses,  the  most  exposed  sites  for 
windmills,  the  best  coal  mines, — and  never  stopping 
to  exhaust  the  second-rate  sources. 

Next,  the  capitalist  must  buy  the  materials  which 
he  is  to  work  up  with  this  power  and  this  machinery. 
And  the  effect  of  this  item,  too,  is  just  like  the  last. 
It  tends  to  migration.  The  principal  materials  of 
industry  are  the  tissues  of  vegetables,  the  fleeces  and 
skins  of  animals,  and  the  products  of  mines.  And 
commerce  is  for  ever  hunting  out  the  places  at  which 


Cost  of  Production.  247 

such  animals  can  be  reared,  such  vegetables  grown, 
and  such  minerals  extracted.  New  places  are  con- 
stantly being  discovered  where  these  can  be  done, 
and  manufactures,  if  not  tied  by  the  other  items  of 
cost,  would  be  for  ever  stimulated  to  move  by  this 
one.  Then  the  capitalist  must  rent  the  land  on 
which  his  factory  is  built,  or  on  which  his  business 
is  carried  on,  and  what  the  laws  are  by  which  this  is 
regulated  we  have  seen. 

Next,  he  must  pay  interest  on  as  much  of  his 
capital  as  he  finds  it  convenient  to  borrow,  and  as 
he  can  get  the  loan  of.  And  this  is  a  steady 
cause  operating  in  favour  of  old  countries,  because 
capital  has  there  accumulated  and  is  cheap,  where- 
as in  new  countries  it  is  still  scarce  and  cannot  be 
borrowed,  except  at  great  cost,  if  at  all.  As  com- 
merce becomes  involved  and  credit  complex,  more 
and  more  of  business  tends  to  be  carried  on  with 
borrowed  money ;  and  the  comparative  cheapness 
of  it  in  established  places  of  industry  is  one  of 
the  reasons  why  trades  stay  there  as  they  do, — 
why  so  many  of  them  are  stationary,  and  so  few 
migratory. 

Lastly,  in  many  cases,  though  not  in  all,  the 
capitalist  must  make  known  the  goodness — or,  at 
least,  must  allege  the  goodness — of  his  work.  Adver- 
tising is  a  kind  of  outlay  which  to  some  extent  is 
essential  in  all  trades,  and  it  takes  different  forms. 
A  company  which  hires  a  showy  shop  front,  a  broker 
who  is  for  ever  sending  round  trade  circulars,  are 
really  advertising  just  as  much  as  dealers  who  insert 
in  the  newspapers  puffs  of  their  articles ;  the  end  in 


248  Economic  Studies. 


all  cases  is  to  sell  something,  and  in  the  long  run  the 
buyer  pays  for  it  all. 

I  have  been  speaking  as  if  all  products  were  made 
or  manufactured.  Common  language  has  no  apt 
expressions  for  the  general  ideas  of  Political  Economy. 
There  is  no  easy  mode  of  describing  all  the  processes 
by  which  all  sorts  of  articles  are  changed  by  men 
from  the  state  in  which  they  are  worth  less,  into  that 
in  which  they  are  worth  more.  The  case  of  a  manu- 
facturer is  the  simplest  case  to  the  imagination,  and 
I  have,  therefore,  taken  it  as  the  standard.  Besides 
it,  there  are  the  breeding  of  animals,  the  growth  of 
vegetables,  and  the  extraction  of  minerals ;  but  any 
one  who  has  analysed  the  outlay  of  the  capitalist  in 
manufactures  will  have  no  difficulty  in  doing  so  for 
the  others  ; — mutatis  mutandis  it  all  comes  to  the 
same  thing,  though  the  words  of  describing  it  differ. 
In  all,  the  capitalist  will  have  to  pay  wages  ;  to  buy 
co-operative  instruments  (animals  included) ;  to 
obtain  a  site ;  probably  to  borrow  capital  ;  probably 
to  make  known  the  value  of  his  article.  His  outlay 
will  be  on  these ;  and  what  he  has  over,  after  re- 
placing these,  is  profit.  The  whole  of  business  in 
great  commercial  countries  is  that  of  a  replacement, 
with  an  addition  of  capital.  As  a  rule,  the  capitalists 
of  a  trade  must  have  their  capital  returned  to  them 
with  the  profit  of  the  country,  or  they  will  not  con- 
tinue in  that  trade. 

II. 

One  result  of  these  truths  is,  I  think,  to  clear  up  the 
most  abstruse  discussion  in  which  English  Political 


Coii  of  Prodtiction.  249 

Economy  has  recently  been  engaged — the  discussion 
which  Mr.  Cairnes  raised  against  Mr.  Mill  on  the 
"  cost  of  production  ".  And  this  result  is  just  of  the 
kind  which  might  be  expected,  for  it  is  in  the  be- 
ginning of  arguments  that  their  difficulties  are  hidden 
and  any  one  who  will  really  go  back  to  that  begin- 
ning will  be  sure  to  meet  his  reward.  Let  us  look  at 
the  matter  a  little  carefully. 

When  any  article,  say  a  steam-engine,  is  in  our 
modern  state  of  industry  produced  by  a  capitalist 
maker,  it  is  necessary  to  repay  to  that  capitalist 
maker  all  which  he  has  expended  upon  it ;  if  it  cost 
;^5oo,  and  the  current  rate  of  profit  be  a  10  per  cent, 
rate,  he  must  have  ;^550.  His  capital  must  be 
returned  to  him,  and  he  must  have  the  remunera- 
tion for  that  capital  for  the  risk  of  losing  it,  for  the 
trouble  of  managing  it,  and  so  on.  But  Mr.  Mill 
takes  his  analysis  further.  He  analyses  the  cost  of 
production  into  the  "  wages  of  labour,"  and  the 
"  profits  of  capital,"  and  after  speaking  of  the  former, 
thus  proceeds  :  "  Thus  far  of  labour,  or  wages,  as  an 
element  in  cost  of  production.  But  in  our  analysis, 
in  the  First  Book,  of  the  requisites  of  production  we 
found  that  there  is  another  necessary  element  in  it 
besides  labour.  There  is  also  capital ;  and  this 
being  the  result  of  abstinence,  the  produce,  or  its 
value,  must  be  sufficient  to  remunerate,  not  only  all 
the  labour  required,  but  the  abstinence  of  all  the 
persons  by  whom  the  remuneration  of  the  different 
classes  of  labourers  was  advanced.  The  return  for 
abstinence  is  profit.  And  profit,  we  have  also  seen, 
is    not    exclusively    the    surplus    remaining    to   the 


250  Economic  Studies. 

capitalist  after  he  has  been  compensated  for  his 
outlay,  but  forms,  in  most  cases,  no  unimportant 
part  of  the  outlay  itself.  The  flax-spinner,  part  of 
whose  expenses  consists  of  the  purchase  of  flax  and  of 
machinery,  has  had  to  pay,  in  their  price,  not  only 
the  wages  of  the  labour  by  which  the  flax  was  grown 
and  the  machinery  made,  but  the  profits  of  the 
grower,  the  flax-dresser,  the  miner,  the  iron-founder, 
and  the  machine-maker.  All  these  profits,  together 
with  those  of  the  spinner  himself,  were  again 
advanced  by  the  weaver,  in  the  price  of  his  material 
— linen  yarn  ;  and  along  with  them  the  profits  of  a 
fresh  set  of  machine-makers,  and  of  the  miners  and 
ironworkers  who  supplied  them  with  their  metallic 
material.  All  these  advances  form  part  of  the  cost 
of  production  of  linen.  Profits,  therefore,  as  well  as 
wages,  enter  mto  the  cost  of  production  which 
determines  the  value  of  the  produce." 

But  this  reasoning  assumes  that  all  capital  comes 
from  "  abstinence,"  whereas  a  great  deal  of  it  does 
not.  What  the  capitalist  in  this  case  really  hires  is 
the  use  of  the  past  plant  of  the  world,  whatever  its 
origin.  Thus  the  steam-engine  maker  hires  the  use 
of  a  whole  series  of  tools  and  things,  going  back  to 
the  first  flint  implements,  and  the  first  tamed  animals. 
In  the  first  beginnings  of  that  series — the  link  on 
which  it  all  hangs — there  was  no  relinquishment  of 
any  enjoyment.  There  was  no  such  "  abstaining," 
as  Mr.  Mill  supposes,  and  therefore  Mr.  Mill's 
analysis  fails.  He  takes  us  back  into  a  hypothetical 
history  which  he  does  not  prove,  and  which  he  could 
not  prove,  for  it  is  not  true. 


Cost  of  Production.  251 


Further,  Mr.  Mill's  analysis  supposes  the  present 
organisation  of  industry — that  in  which  the  capitalist 
buys  the  force  of  the  labourer  and  pays  him  wages — 
to  be  the  one  which  began  at  the  beginning.     Mr. 
Mill  says :  "  What  the  production   of  a  thing  costs 
to   its   producer,  or  its   series  of  producers,  is  the 
labour  expended  in  producing  it.     If  we  consider  as 
the  producer  the  capitalist  who  makes  the  advances, 
the   word  'labour'   may  be   replaced    by  the   word 
'wages':    what  the   produce    costs   to    him,   is   the 
wages  which  he  has  had  to  pay.     At  the  first  glance, 
indeed,  this  seems  to  be  only  a  part  of  his  outlay, 
since  he  has  not  only  paid  wages  to  labourers,  but 
has  likewise  provided  them  with  tools,  materials,  and 
perhaps  buildings.     These  tools,  materials,  and  build- 
ings, however,  were  produced  by  labour  and  capital ; 
and  their  value,  like  that  of  the  article  to  the  production 
of  which  they  are  subservient,  depends  on  cost  of  pro- 
duction, which  again  is  resolvable  into  labour.     The 
cost  of  production  of  broadcloth  does  not  wholly  con- 
sist in  the  wages  of  weavers  ;  which  alone  are  directly 
paid  by  the  cloth  manufacturer.     It  consists  also  of 
the  wages  of  spinners  and  wool-combers,  and,  it  may  be 
added,   of  shepherds,   all  of  which  the  clothier  has 
paid  for  in  the  price  of  yarn.     It  consists,  too,  of  the 
wages  of  builders  and  brick-makers,  which   he  has 
reimbursed    in    the    contract    price    of    erecting    his 
factory.     It  partly  consists  of  the  wages  of  machine- 
makers,  iron-founders,   and   miners.     And  to   these 
must  be  added  the  wages  of  the  carriers  who  trans- 
ported any  of  the  means  and  appliances  of  the  pro- 
duction to  the  place  where  they   were  to   be   used, 


252  Economic  Studies. 


and  the  product  itself  to  the  place  where  it  is  to  be 
sold." 

This  principle,  as  applied  to  existing  societies, 
may  seem  very  obvious  ;  indeed,  it  is  most  commonly 
assumed  in  popular  discussions,  both  as  being  true 
and  as  being  the  principle  of  English  Political  Eco- 
nomy. But,  nevertheless,  most  eminent  Political 
Economists  refuse  to  regard  it  as  ultimate,  and  try 
to  get  behind  it.  And,  no  doubt,  in  one  sense  it  is 
not  ultimate.  There  are  processes  acting  on  value 
of  which  it  does  not  take  account.  For  example, 
the  wages  of  similar  labour  tend — though  slowly — 
to  be  equal  in  all  employments,  and  it  is  contended 
that  you  ought  not  to  say  that  the  exchange  value  of 
an  article  has  arrived  at  its  "  cost  value  "  while  the 
wages  paid  in  its  production  are  greater  or  less  than 
those  paid  to  similar  labourers  in  other  employments. 
Again,  the  wages  of  dissimilar  kinds  of  labour  bear, 
as  a  rule,  some  kind  of  proportion  to  one  another 
(though  the  exceptions  to  this  rule  are  in  all  societies 
many,  and  though  some  of  them  last  for  a  very  long 
time),  and  it  is  said  that  we  have  not  arrived  at  the 
"  cost  value  "  of  any  article  until,  in  the  case  of  that 
article,  the  different  species  of  labour  are  rewarded 
in  the  same  proportion  that  they  are  in  the  case  of 
other  articles.  And,  no  doubt,  if  we  choose,  we 
may  thus  define  "cost  value";  we  may  say  that  it 
is  not  realised  till  these  conditions  are  satisfied.  But 
if  we  do,  we  must  go  further,  and  regard  "  cost 
value"  as  an  ideal  limit,  rather  than  as  any  actual 
thing  at  all.  In  truth  the  conception  of  the  universal 
influence   of  the    capitalist-employer    is   essentially 


Cost  of  Production.  253 

modem.  We  have  seen  before  that  capital  is  scarce 
in  new  countries,  that  it  moves  slowly,  and  that  the 
labourer  and  the  capitalist  are  often  one  and  the 
same.  There  is  no  such  separate  outlay  as  Mr. 
Mill's  analysis  presumes,  and  as  our  modern  practice 
exhibits.  On  a  large  scale  no  such  thing  is  possible 
till  a  good  available  money  exists  in  which  wages 
can  be  paid ;  and  such  a  money  did  not  begin  till 
the  human  race  had  been  working  and  labouring  for 
many  hundred  years. 

Mr.  Mill's  attempt  to  answer  the  question,  "  What 
is  the  cost  of  production  which  determines  value  ?  " 
by  saying  that  it  is  the  sum  of  the  wages  of  labour 
and  profits  and  abstinence  since  the  beginning  of 
history,  fails  therefore  at  both  its  cardinal  points — 
for  in  the  beginning  of  history  there  was  much 
capital  yielding  profit  which  did  not  come  from  ab- 
stinence, and  much  labour  which  was  not  paid  by 
wages ;  and  this  capital  and  this  labour  were  the 
seeds  of  all  which  now  is,  and  must  be  reckoned  in 
the  list  of  things  that  made  it,  if  we  add  up  those 
things. 

Nor  do  I  think  that  Mr.  Cairnes,  most  acute  as  he 
is  here,  as  always,  at  all  mends  the  matter.  He 
says  "  that  Mr.  Mill  was  wrong  in  adding  up  past 
wages  and  past  profits  so  as  to  make  a  total  '  cost 
of  production,'  for  that  neither  'wages  nor  profits' 
are  properly  part  of  that  cost  at  all ".  He  tells  us  : 
"  Of  all  ideas  within  the  range  of  economic  specula- 
tion, the  two  most  profoundly  opposed  to  each 
other  are  cost  and  the  reward  of  cost, — the  sacrifice 
incurred   by   man    in   productive    industry,  and    the 


254  Economic  Studies. 

return  made  by  nature  to  man  upon  that  sacrifice. 
All  industrial  progress  consists  in  altering  the  pro- 
portion between  these  two  things  ;  in  increasing  the 
remuneration  in  relation  to  the  cost,  or  in  diminishing 
the  cost  in  relation  to  the  remuneration.  Cost  and 
remuneration  are  thus  economic  antitheses  of  each 
other  ;  so  completely  so,  that  a  small  cost  and  a 
large  remuneration  are  exactly  equivalent  expres- 
sions. Now  in  the  analysis  of  cost  of  production 
which  I  have  quoted,  these  two  opposites  are  identi- 
fied ;  and  cost,  which  is  sacrifice,  cost,  which  is 
what  man  pays  to  Nature  for  her  industrial  rewards, 
is  said  to  consist  of  wages  and  profits,  that  is  to  say, 
of  what  Nature  yields  to  man  in  return  for  his 
industrial  sacrifices.  The  theory  thus  in  its  simple 
statement  confounds  opposite  facts  and  ideas,  and 
further  examination  will  show  that  it  involves  con- 
clusions no  less  perplexed,  and  in  conflict  with 
doctrines  the  most  received." 

But  the  "  cost  of  production,"  in  the  sense  in 
which  that  cost  determines  market  value,  means  the 
"cost"  to  the  person  who  brings  it  to  that  market. 
In  England,  at  present,  the  capitalist  pays  the 
wages,  and  he  will  not  do  it  unless  he  earns  the 
profit.  These  pecuniary  items  are  certainly  ele- 
ments in  price,  and  "  exchangeable  value "  is  only 
an  abstract  word  for  a  perfect  price — a  price  which 
would  never  alter  by  changes  in  the  money  medium 
— and  changes  in  which,  accordingly,  would  show 
accurately  the  changes  in  the  buying  power  of 
things.  The  pecuniary  remuneration  to  the  labourer, 
and   the  pecuniary   remuneration   of  the  capitalist. 


Cost  of  Production.  255 


seem  to  me  to  be  essential  ingredients  in  the  per- 
manent money  price  which  is  to  pay  them  both,  for 
that  price  must  permanently  be  such  as  will  so  pay 
them,  and  so  pay  them  adequately. 

Again,  I  do  not  think  that  abstinence  and  labour, 
or  the  rewards  of  them,  are  the  sole  elements  in  the 
existing  cost  of  production.  There  is  a  third,  which 
I  call  the  hire  of  the  present  plant — of  the  existing 
productive  things  in  the  world.  Suppose  that  a 
man  goes  into  business  with  borrowed  capital  only, 
he  will  have  to  pay  the  "  compensation  "  to  absti- 
nence, that  is,  the  interest  on  capital  to  the  man  who 
lends  him  the  money,  and  he  will  have  likewise  to 
hire  labourers  and  pay  them  their  wages.  But 
besides  this,  he  will  have  to  hire  machines  to  make 
his  things.  I  say  hire,  not  buy,  for  as  far  as  the 
"  cost  of  production "  goes,  this  word  gives  more 
readily  the  required  idea.  A  capitalist  who  has 
bought  his  machine  gets  back  his  money  by  an 
annuity  ;  in  the  price  of  each  bale  of  goods  which  he 
sells  he  includes  a  fraction  of  that  annuity.  It  is  as 
if  he  hired  the  machine  and  paid  so  much  per  bale 
as  a  rent  or  royalty  for  using  it.  When  he  buys 
the  machine  he  commutes  this  royalty  for  a  sum 
down.  But  he  must  get  it  repaid  him  annually  for 
all  that.  And  this  repayment  is  so  much  to  be 
added  to  the  interest  which  he  pays  on  his  bor- 
rowed capital,  and  to  what  he  pays  in  wages.  It 
is  an  outlay  which  is  a  compensation  neither  for 
abstinence  nor  labour. 

Cairnes  would  probably  have  said  that  as  all  the 
machines  so  hired  were  produced  once  by  abstinence 


256  Economic  Studies. 


and  labour,  the  hire  of  them  was  really  a  compen- 
sation to  that  past  abstinence  and  labour.  But 
here  historical  investigation  again  helps  us.  We 
have  seen  that  the  existing  producing  things  of  the 
world  are  the  growth  of  a  long  history — that  they 
are  the  product  of  many  things,  and  that  they 
cannot  be  set  down  as  the  products  of  simple 
abstinence  and  simple  labour.  If  you  resort  to  an 
historical  explanation,  the  first  requirement  is  that 
the  history  must  be  true.  No  hypothesis  or  set  of 
abstractions  can  help  here.  The  appeal  is  to  what 
has  happened  in  matter  of  fact,  and  what  is  said  to 
have  thus  happened  never  did  so.  And  you  cannot 
even  confine  such  reasoning  to  somewhat  developed 
states  of  society,  for  the  very  essence  of  this  reason- 
ing is  to  go  back  into  the  past  and  to  assume  that 
the  cause  of  economic  production  has  been  uniform 
— has  always  been  the  product  of  the  same  two 
stated  agencies. 

And  not  only  are  the  real  facts  of  the  growth  of 
wealth  thus  inconsistent  with  the  analysis  which 
both  Mill  and  Cairnes  give  us  of  the  "  cost  of  pro- 
duction," but  they  are  still  more  inconsistent  with 
the  analysis  of  that  cost  which  was  generally  held 
by  the  preceding  generation  of  English  Economists, 
and  which  is  constantly  to  be  found  in  the  writings 
of  Ricardo,  though  what  seems  to  me  to  be  a  truer 
view  is,  as  I  shall  presently  show,  to  be  found  there 
also.  This  older  analysis  considers  that  "labour" 
is  the  sole  source  of  value,  and  that  all  things  of 
the  same  price  have  been  produced  by  an  equal 
quantity   of   "labour".      But    this    older   theory   is 


Cost  of  Production.  257 


evidently  more  unlike  the  facts  than  either  of  the 
newer  ones.  We  have  seen  that  these  were  not 
true,  because  they  assumed  that  two  factors — labour 
and  abstinence— were  the  sole  sources  of  wealth. 
And  a  fortiori  the  older  theory  is  untrue,  for  it 
assumes  that  a  single  factor — labour — has  alone 
produced  wealth. 

III. 

The  difference  which  remains  over  in  the  hands 
of  the  capitalist  is  his  profit.  And  this  is  a  most 
essential  element  in  the  cost  of  production,  for  every- 
thing in  developed  trade  depends  on  him.  Unless 
he  brings  an  article  to  market  it  will  not  be  brought, 
and  he  will  not  bring  it  unless  he  has  enough  to 
repay  him  for  what  he  does.  And  what  he  does  is 
the  most  intellectual  part  of  wealth — production  and 
distribution.  He  is  to  the  rest  of  the  people  so 
engaged  what  the  general  is  to  the  army.  It  is  he 
who  settles  what  work  operatives  shall  do,  what  sums 
clerks  shall  add  up,  how  the  managing  men  shall  be 
employed.  Not  only  does  he  save  his  capital  and 
does  not  eat  it,  not  only  does  he  risk  his  capital,  but 
he  manipulates  his  capital.  It  is  common  to  speak 
of  the  intellectual  part  of  profit  as  the  "  wages  of 
superintending  wisdom ".  You  might  as  well  call 
whist  superintending  the  cards.  A  man  who  plays 
cards  very  ill,  will  probably  "play"  his  capital  just 
as  ill.  The  same  kind  of  sagacity,  the  same  observa- 
tion, the  same  self-restraint  are  required  in  both. 
But  though  this  is  required  of  the  capitalist,  it  is  not 
all    which    is  required.     There    is  quite  a  different 

17 


258  Economic  Siudies. 


element  besides.  All  business  is  in  the  nature  of  a 
game  more  or  less  difficult ;  and  requires  the  same 
sort  of  faculties,  and  the  same  kind  of  attention,  as  a 
game.  But  in  most  trades  a  capitalist  has  to  govern 
others ;  a  large  employer  of  labour  has  to  govern 
many  men.  He  has  not  only  to  move  his  pawns, 
but  to  rule  his  pawns.  The  pieces  with  which  he 
plays  are  of  flesh  and  blood,  and  will  not  move  unless 
they  like.  He  has  to  manage  that  they  shall  like. 
And,  unless  he  is  paid  for  all  this,  the  article  will  not 
be  made. 

Ricardo  was  the  first  to  give  anything  like  this 
analysis  of  the  cost  of  production.  We  have  seen 
how  imperfect,  how  confused,  the  analysis  of  Adam 
Smith  was.  Nor  was  there  any  great  step  in  the 
matter  made  between  his  time  and  Ricardo's.  The 
subject  was  not  accurately  worked  out. 

The  analysis  of  Ricardo  was,  undoubtedly,  defective, 
and  he  got  himself  into  a  difficulty  of  language  which 
perplexes  his  writings  and  puzzles  half  his  readers. 
Bentham  said  that  he  "  confounded  '  cost '  and 
'  value '  ".  And,  in  fact,  having  satisfied  himself  that 
things  of  equal  cost  of  production  will  in  the  long  run 
exchange  for  one  another,  he  came  to  speak  of  the 
effect  as  if  it  were  the  cause,  and  of  the  cause  as  if  it 
were  the  effect.  I  do  not  think  he  actually  confused 
the  two  in  thought,  but  he  often  seems  to  do  so. 
Not  being  a  highly  educated  man,  he  had,  as  has  been 
said,  a  curious  difficulty  in  the  use  of  abstract  lan- 
guage. He  is  like  a  mathematician  in  whose  work 
there  are  a  good  man}'  small  inaccuracies,  but  whose 
work  is  still  in  the  main  right.     Of  course  such  a 


Cost  of  Procli(i:tiott^  259 


mathematician  is  a  very  imperfect  one ;  the  essence 
of  mathematics  is  accuracy.  In  the  same  way 
Ricardo  is  a  very  imperfect  abstract  writer.  The 
essence  of  abstract  writing  is  precision,  and  in  his  use 
of  abstract  words  he  is  defective  in  precision.  Still 
the  fault  is  of  words  only.  When  you  come  to 
examine  the  thought,  you  find  that  there  was  no 
obscurity  in  it ;  that  it  was  perfectly  clear  in  his 
mind. 

It  is  a  much  worse  fault  that  he  only  incompletely 
seized  the  notion  that  in  an  advanced  state  of  society, 
where  the  capitalist  brings  the  labour  and  offers  the 
article  for  sale,  the  cost  to  the  capitalist  is  that 
which  regulates  the  value.  No  doubt,  as  we  have 
seen,  it  is  easy  to  imagine  a  simple  society,  where 
the  labourers  all  support  themselves  —  a  set  of 
hunters  and  weavers  and  fishers  —  where  labour 
migrated  from  employment  to  employment  just  as 
one  was  better  remunerated  than  another,  and  in 
which  labour  being  the  sole  cost  of  production  (that 
is  to  say,  the  labourers  owning  their  own  food  and 
using  their  own  tools),  it  was  this  migration  which 
adjusted  exchangeable  value  to  cost.  But  there  is 
a  much  quicker  adjustment  when  capital  is  movable, 
and  rapidly  changes  from  employment  to  employ- 
ment. What  it  costs  the  capitalist  together  with 
his  profit  settles  the  value.  It  does  so,  though  the 
rate  of  wages  for  equal  qualities  of  labour  may  be 
higher  in  one  trade  than  another.  As  long  as  that 
is  the  case,  the  cost  will  be  higher  in  the  trade  where 
wages  are  higher;  and,  therefore,  the  article  produced 
will  sell  for  more.     In  the  end,  labour  will  in  mosl 


26o  Economic  Studies. 


cases  migrate  from  the  badly  paid  to  the  well  paid 
employment,  and  then  the  labour  in  both  will  be 
equally  remunerated,  and  the  price  so  far  as  it  de- 
pends on  labour  will  be  the  same.  But  even  before 
this,  the  cost  of  production  to  the  capitalist  will 
regulate  the  price  just  as  much  as  it  does  afterwards. 
Ricardo  might,  more  than  any  one  else,  have  been 
expected  to  point  this  out,  for  he  had  an  infinitely 
better  perception  of  the  quickness  with  which  capital 
moves  than  any  previous  economist,  and  of  the  way 
in  which  it  moves.  "  Whilst  every  man  is  free  to 
employ  his  capital  where  he  pleases,  he  will  naturally 
seek  for  it  that  employment  which  is  most  advan- 
tageous ;  he  will  naturally  be  dissatisfied  with  a 
profit  of  10  per  cent.,  if  by  removing  his  capital  he 
can  obtain  a  profit  of  15  per  cent.  This  restless 
desire  on  the  part  of  all  the  employers  of  stock,  to 
quit  a  less  profitable  for  a  more  advantageous  busi- 
ness, has  a  strong  tendency  to  equalise  the  rate  of 
profits  of  all,  or  to  fix  them  in  such  proportions  as 
may,  in  the  estimation  of  the  parties,  compensate  for 
any  advantage  which  one  may  have,  or  may  appear 
to  have,  over  the  other.  It  is  perhaps  very  difficult 
to  trace  the  steps  by  which  this  change  is  effected  ; 
it  is  probably  effected  by  a  manufacturer  not  ab- 
solutely changing  his  employment,  but  only  lessening 
the  quantity  of  capital  he  has  in  that  employment. 
In  all  rich  countries,  there  is  a  number  of  men  forming 
what  is  called  the  moneyed  class ;  these  men  are 
engaged  in  no  trade,  but  live  on  the  interest  of  their 
money,  which  is  employed  in  discounting  bills,  or  in 
loans  to  the  more  industrious  part  of  the  community. 


Cost  of  Production.  261 


The  bankers  too  employ  a  large  capital  on  the  same 
objects.  The  capital  so  employed  forms  a  circulating 
capital  of  a  large  amount,  and  is  employed,  in  larger 
or  smaller  proportions,  by  all  the  different  trades  of 
a  country.  There  is  perhaps  no  manufacturer,  how- 
ever rich,  who  limits  his  business  to  the  extent  that 
his  own  funds  alone  will  allow  ;  he  has  always  some 
portion  of  this  floating  capital,  increasing  or  diminish- 
ing according  to  the  activity  of  the  demand  for  his 
commodities.  When  the  demand  for  silk  increases, 
and  that  for  cloth  diminishes,  the  clothier  does  not 
remove  with  his  capital  to  the  silk  trade,  but  he 
dismisses  some  of  his  workmen,  he  discontinues  his 
demand  for  the  loan  from  bankers  and  moneyed  men  ; 
while  the  case  of  the  silk  manufacturer  is  the  reverse  : 
he  wishes  to  employ  more  workmen,  and  thus  his 
motive  for  borrowing  is  increased  :  he  borrows  more, 
and  thus  capital  is  transferred  from  one  employment 
to  another,  without  the  necessity  of  a  manufacturer 
discontinuing  his  usual  occupation.  When  \\q  look 
to  the  markets  of  a  large  town,  and  observe  how 
regularly  they  are  supplied  both  with  home  and 
foreign  commodities,  in  the  quantity  in  which  they 
are  required,  under  all  the  circumstances  of  varying 
demand,  arising  from  the  caprice  of  taste,  or  a  change 
in  the  amount  of  population,  without  often  producing 
either  the  effects  of  a  glut  from  a  too  abundant  supply, 
or  an  enormously  high  price  from  the  supply  being 
unequal  to  the  demand,  we  must  confess  that  the 
principle  which  apportions  capital  to  each  trade  in 
the  precise  amount  tlmt  it  is  required,  is  more  active 
than  is  generally  supposed." 


262  Economic  Studies. 


From  this  passage  it  would  have  been  expected 
that  Ricardo  would  have  said  that  in  the  state  of 
industry  with  which  he  was  here  dealing,  the  cost  of 
production  which  determines  the  price  was  the  out- 
lay of  the  capitalist, /)/ws  his  profit,  and  that  he  would 
so  have  shown  the  subject  in  its  true  simplicity.  But 
though  in  many  passages  he  approaches  to  this  clear- 
ness, though  continually  you  seem  to  see  the  thought 
in  his  mind,  he  never  quite  utters  it.  You  can  no- 
where find  it  in  words.  The  difficulty  of  applying  to 
real  life  the  doctrine  of  cost  of  production,  when  other- 
wise explained,  comes  out  in  the  following  passage. 
"  In  speaking,"  says  Ricardo,  "  however,  of  labour  as 
being  the  foundation  of  all  value,  and  the  relative 
quantity  of  labour  as  almost  exclusively  determining 
the  relative  value  of  commodities,  I  must  not  be 
supposed  to  be  inattentive  to  the  diff'erent  qualities  of 
labour,  and  the  difficulty  of  comparing  an  hour's  or  a 
day's  labour,  in  one  employment,  with  the  same  dura- 
tion of  labour  in  another.  The  estimation  in  which 
different  qualities  of  labour  are  held,  comes  soon  to 
be  adjusted  in  the  market  with  sufficient  precision 
for  all  practical  purposes,  and  depends  much  on  the 
comparative  skill  of  the  labourer,  and  intensity  of  the 
labour  performed.  The  scale,  when  once  formed,  is 
liable  to  little  variation.  If  a  day's  labour  of  a  work- 
ing jeweller  be  more  valuable  than  a  day's  labour  of 
a  common  labourer,  it  has  long  ago  been  adjusted, 
and  placed  in  its  proper  position  in  the  scale  of  value.'- 

And  fifty  years  ago,  when  manufactures  grew  but 
slowly,  and  when  the  arts  were  comparatively  station- 
ary, this  mode  of  speaking  may  not  have  been  wholly 


Cost  of  Production.  263 

incorrect — at  any  rate  was  not  perfectly  false.  But 
now-a-days  the  different  skill  used  in  different  employ- 
ments varies  incessantly ;  it  tends  to  increase  with 
every  improvement  in  quality ;  it  tends  to  diminish 
with  every  improvement  in  machinery.  Even  be- 
tween the  same  employment  at  different  times  it  is 
difficult  to  compare  it,  and  between  two  different 
employments  it  is  impossible  to  compare  it.  In  a 
long  time  the  circulation  of  labour  from  employment 
to  employment  no  doubt  brings  about  a  rough  and 
approximate  equality.  But  this  is  only  in  a  long 
time;  it  is  a  gradual  and  most  incalculable  operation. 
The  cost  of  production  would  hardly,  in  any  practical 
sense,  determine  price  at  all,  if  it  only  determined 
value  after  so  many  years  and  so  irregularly.  In  fact, 
capital  travels  far  quicker  than  labour,  and  there  is 
some  approximate  equality  between  the  products  of 
two  equal  and  similarly  circumstanced  capitals ;  and 
"cost  of  production,"  when  analysed  properly,  is  a 
prompt  and  effective  regulator  of  "value". 

But  though  Ricardo  did  not  see  this,  as  it  is  easy 
to  see  it  now,  he  saw  more  clearly  than  many  people 
now  do  that  a  rise  of  wages  does  not  entail  a  rise  of 
prices.  As  yet  I  can  only  deal  with  the  case  of  a 
money-mining  country  ;  a  country  of  gold  and  silver 
mines ;  whether  the  fact  that  money — that  the 
precious  metals — are  obtained  by  foreign  trade,  does, 
or  does  not,  make  a  difference,  will  appear  afterwards. 
But  in  the  money-mining  country  nothing  can  be 
clearei".  Nothing  can  change  relative  value  except 
that  which  alters  relative  cost  of  production ;  what 
acts  equally  on  all  commodities  will  alter  the  ex- 


264  Economic  Studies. 


changeable  quality  of  none.  If  all  equal  capitals 
were  spent  in  wages  equally — say,  if  one-half  of  every 
3^100  was  always  so  spent  in  every  trade,  including 
money-mining — a  rise,  say,  of  twenty  per  cent,  would 
not  affect  values  at  all.  It  would  tell  on  gold-mining 
as  well  as  on  every  other  kind  of  production.  "  Hats," 
to  take  Ricardo's  favourite  article,  would  be  produced 
at  twenty  per  cent,  more  cost,  but  then  sovereigns 
would  be  produced  at  twenty  per  cent,  more  cost 
also.  And,  therefore,  there  would  be  no  more  reason 
for  raising  the  value  of  hats  as  against  sovereigns 
than  the  value  of  sovereigns  as  against  hats.  The 
cause  on  one  side  is  equal  to  the  cause  on  the  other. 

This  is  at  present  curiously  neglected  in  our 
common  discussions.  So  far  from  Political  Economy 
having  advanced  on  this  point  since  Ricardo's  time, 
it — at  least,  the  common  exposition  of  it — has  re- 
trograded. In  the  incessant  discussions  of  late 
years  as  to  the  effect  of  Trades  Unions,  it  is  per- 
petually assumed  that,  if  these  Unions  extended  to 
all  employments,  and  if  they  produced  a  rise  of 
wages  in  them  all,  they  would  certainly  and  neces- 
sarily produce  a  universal  rise  of  prices.  But  the 
slightest  thought  would  have  shown  that  this  rise,  at 
least  in  a  gold-mining  country,  would  act  on  the 
gold  as  well  as  on  the  commodities  exchanged  for 
gold,  and  that  the  effect  upon  the  one  would  counter- 
balance the  effect  upon  the  other. 

Ricardo's  conception  of  the  cost  of  production  was 
over-simplified ;  it  left  out  part  of  the  truth,  and, 
consequently,  gave  an  undue  prominence  to  the  other 
parts.     But  the  slightest  comparison  between  it  and 


Cost  of  Production.  265 


the  ideas  of  Adam  Smith  will  show  how  great  is  the 
advance  which  Political  Economy  has  made  between 
the  two  writers.  Ricardo's  is  a  first  approximation 
to  an  exact  science ;  Adam  Smith's  is  but  a  set  of 
popular  conceptions — always  sensible,  but  often  dis- 
cordant. 

IV. 

But  it  will  be  asked,  if  in  each  trading  country  the 
trader  must  receive  the  rate  of  profit  of  the  country, 
—  what  is  it  which  determines  that  rate  of  profit  ? 
And  this  is  rather  a  long  topic  of  inquiry. 

For  popular  purposes,  it  is  easy  to  say  that  the 
profit  of  a  capitalist  in  any  undertaking  is  that  which 
remains  after  the  cost  of  that  undertaking  has  been 
satisfied.  The  outlay  must  be  repaid,  and  what 
remains  over  is  profit.  But  in  an  ordinary  under- 
taking, say,  in  making  cotton  twist,  there  is  this 
difficulty  :  a  great  deal  of  the  outlay  is  upon  machines 
and  raw  material,  which  are  the  results  of  previous 
undertakings,  and  which  must  in  the  long  run  be 
valued  at  the  outlay  on  these  undertakings,  plus  the 
profit  at  the  rate  of  the  time  and  country,  and  this 
profit  is  exactly  what  we  are  in  search  of.  The 
common  trade  facts  do  not  give  us  that  which  we 
want  to  know  in  a  sufficiently  simple  form. 

Supposing  one  capitalist  ordered  the  whole  article 
from  the  beginning ;  suppose  the  country  was  one  in 
which  cotton  was  grown ;  and  suppose  that  the 
capitalist  who  grew  it  made  all  the  necessary 
machines  (including  any  preliminary  ones  necessary 
to  make  them),  it  is  evident  that  his  outlay  would  be 


266  Economic  Studies. 


of  one  sort,  wages  only.  He  would  have  to  deal 
exclusively  with  labourers,  for  he  would  go  himself 
to  the  root  of  the  matter,  and  would  employ  the 
results  of  no  previous  capitals.  His  outlay  would 
then  consist  of  wages  only,  and  his  profit  would  be 
the  amount  remaining  to  him  when  that  outlay  was 
recouped.  He  would  sell  his  article,  and  his  profit 
would  be  the  price,  minus  the  wages  paid. 

This  analogy  represents  the  real  facts  much  more 
accurately  than  would  at  first  sight  appear.  Sup- 
posing the  profits  of  all  trades  to  be  equal,  it  would 
represent  them  exactly.  The  manufacture  of  a  con- 
sumable article  is  divided,  say,  into  a  hundred  under- 
takings by  various  capitalists.  If  any  one  of  these 
were — all  things  considered — more  profitable  than 
the  others,  capital  would  leave  those  others,  and 
would  collect  in  it.  The  natural  tide  of  capital  from 
the  less  to  the  more  remunerative  enterprise  makes 
the  profits  in  each  part  of  an  entire  manufacture 
equal — which  is  as  much  as  to  say  that  it  makes  the 
entire  manufacture  just  what  it  would  have  been  had 
one  single  capitalist  ordered  or  managed  the  whole 
of  it  from  the  very  beginning  to  the  very  end.  As 
we  have  seen,  this  doctrine  of  the  equality  of  profit 
is  but  an  approximation,  but  we  have  also  seen  that 
it  is  a  most  useful  approximation,  and  what  are  the 
corrections  to  be  made  in  using  it.  Subject  to  these 
corrections,  therefore,  we  can  say  that  the  profit  on 
an  article — entirely  made  and  manufactured  in  the 
same  country — is  the  price  of  the  article  minus  the 
wages  spent  on  it.  But  we  must  reserve  an  inquiry 
into  the  possible  profit  where  foreign  materials  and 


Cost  of  Produciiun.  267 

machines  are  used,  for  there  is  no  transfer  hither 
and  thither  of  capitals  between  nations,  and  no  con- 
sequent equality  in  the  returns  on  them.  We  can 
only  return  to  that  case  after  examining  the  primitive 
simple  one,  where  everything  is  made  in  the  same 
country. 

You  say,  I  shall  be  told,  that  the  profit  is  the 
selling  price,  minus  the  outlay,  but  you  do  not  tell 
us  what  is  the  selling  price.  Nor  can  it  be  told 
without  seeing  how  money  is  obtained.  The  price 
of  a  thing  is  the  money  for  which  it  exchanges,  and 
you  must  consider  the  nature  of  it  before  you  can 
know  what  that  price  will  be. 

The  money  of  commerce  is  composed  of  the 
precious  metals — gold  and  silver — say,  for  shortness, 
gold,  which  is  a  commodity  like  any  other.  It  is 
raised  in  the  same  way  as  iron,  and  according  to  the 
same  laws.  The  capitalist  must  have  in  it  the  same 
profit  that  he  has  in  other  trades  and  no  more.  But 
the  difference  between  it  and  other  trades  is  that  there 
is  no  need  to  sell  the  article,  A  capitalist  raises  so 
much  gold,  after  a  certain  outlay  ;  he  can  take  that 
gold  to  the  Mint,  and  the  difference  between  it  and 
the  outlay  is  the  profit.  There  is  no  haze  about  it ; 
no  difficult  words  such  as  price  and  value.  It  is  a 
definite  physical  quantity — 10,000  sovereigns  were 
expended  on  the  mine,  and  11,000  came  out,  making 
a  profit  of  10  per  cent.  The  standard  rate  of  profit  in 
money-mining  is  the  rate  of  profit  in  the  least  produc- 
tive money  mine  that  can  keep  itself  at  work.  All 
other  profits  compare  themselves  with  that,  for  monev 
is  the  standard  of  comparison,  the  reckoning  engine. 


268  Economic  Studies. 


Suppose  it  takes  a  third  less  labour  and  a  third 
less  machines  to  produce  an  ounce  of  gold  ;  an  ounce 
of  gold  will  exchange  for  one-third  less  of  other 
things ;  its  buying  power  will  be  that  much  less ; 
corn,  cotton,  and  all  other  things,  will  exchange  for 
so  much  more  of  it. 

The  money  price  of  mining  machinery  will  rise, 
the  outlay  of  money  necessary  to  work  mines  will 
augment,  and  the  return  to  it,  though  greater  in 
quantity,  will  be  identical  in  proportion — will  be  the 
same  rate  per  cent.  The  gold-mines  which  cannot 
pay  that  profit  will  be  disused,  just  as  old  worn-out 
iron-mines  are  disused,  and  from  the  same  cause — it 
no  longer  pays  to  work  them.  There  will,  however, 
be  this  difference,  though  the  rate  of  profit  in  the 
gold  trade  will  be  the  same,  in  other  respects  the 
trade  will  have  changed.  General  prices  will  have 
altered. 

In  consequence,  more  money  will  be  necessary  to 
circulate  the  same  commodities,— to  do  the  same 
business.  The  same  moneyed  capital  in  the  gold  trade 
will  produce  the  same  number  of  sovereigns  as  before; 
it  will  yield  as  much  per  cent.  The  change  will  be, 
that  the  same  "  moneyed  capital  "  will  buy  less  labour 
and  fewer  machines,  and  the  number  of  sovereigns 
that  make  the  profit,  though  the  same,  will  buy  less 
of  other  things. 

At  every  particular  value  of  a  sovereign  there  are 
a  certain  number  of  sovereigns  required  to  carry  on 
the  business  of  a  country.  If  more  than  that  number 
is  supplied,  their  value — their  buying  power — will 
diminish,  and  the  price  of  all  other  things  measured 


Cost  of  Production.  269 

against  them  will  rise.  The  machinery  and  labour 
by  which  sovereigns  arc  made  are  a  part  of  those 
other  things,  and  their  price  will  rise  too.  The  outlay 
on  the  production  of  sovereigns  will  augment,  and 
there  will  be  a  discouragement  to  produce  them. 
The  price  in  "sovereigns"  of  all  other  articles  will 
have  risen,  as  well  as  the  outlay  on  their  production; 
the  apparent  profit  in  producing  them  will,  therefore, 
be  as  before.  But  though  the  outlay  on  a  given  number 
of  sovereigns  has  risen,  they  are  in  no  way  better  than 
before.  There  will,  therefore,  be  a  diminution  in  the 
production  of  sovereigns,  and  the  number  in  circula- 
tion will  be  reduced  to  that  required  at  cost  value  to 
conduct  the  trade  of  the  country. 

The  money  rate  of  wages  is  a  case  of  "  supply  and 
demand,"  using  those  words  in  the  sense  in  which 
they  have  been  explained — that  is,  it  is  determined 
by  the  amount  of  money  which  the  owners  of  it  wish 
to  expend  in  labour,  by  the  eagerness  with  which 
they  want  that  labour,  by  the  amount  of  labour  in 
the  market  which  wishes  to  sell  itself  for  money,  and 
by  the  eagerness  with  which  the  labourers  desire  that 
money.  This,  as  we  have  seen,  is  peculiarly  a  case 
in  which  the  market  feelings  of  the  two  bodies  of 
exchangers  are  carefully  to  be  considered.  If  the 
labourers  are  in  want,  they  must  take  whatever  the 
capitalists  offer  them  ;  if  the  capitalists  are  in  want, 
they  must  buy  the  labour  on  the  cheapest  terms  they 
can,  but  get  it  they  must.  And  the  capitalist  is  as 
likely,  perhaps,  to  be  in  want  as  the  labourer.  It  is 
true  that  the  distress  of  the  labourer  is  much  more 


270  Economic  Studied. 

conspicuous,  and  that  he  advertises  it ;  he  goes  about 
saying:  "I  am  starving,  and  it  is  the  tyranny  of 
capital  which  is  killing  me ".  But  it  is  also  true 
that  the  capitalist  is  in  danger  of  ruin,  and  that  he 
conceals  it.  If  he  cannot  complete  contracts  which 
he  has  made,  if  he  has  to  stay  out  of  a  return  from 
his  business  longer  than  he  can  afford,  he  is  ruined. 
But  he  will  never  say  this,  because  it  may  injure  his 
credit  and  quicken  the  coming  of  the  evil.  He  will 
lie  awake  with  anxiety  till  his  hair  turns  prematurely 
grey,  and  till  deep  lines  of  care  form  on  his  brow,  but 
will  say  nothing.  And  it  is  necessary  to  insist  on 
this  now,  because  our  current  literature — some  even 
of  our  gravest  economic  literature — is  dangerously 
tainted  with  superficial  sentiment.  It  speaks  much 
of  the  sufferings  of  the  working  men  which  are  seen, 
and  little  of  those  of  the  capitalist  which  are  not  seen. 
But  the  capitalist,  being  a  higher  and  more  thinking 
kind  of  man,  is  probably  of  more  sensitive  organisa- 
tion than  the  labourer,  and  pecuniary  anxiety  is  a 
more  racking  thing  than  any  physical  kind  of  pain 
short  of  extreme  hunger.  The  mental  feelings  of  the 
capitalist  must  just  as  much  be  regarded  as  those  of 
the  labourer  in  computing  the  rate  at  which  the  money 
of  the  one  will  be  exchanged  for  the  labour  by  the  other. 
The  real  remuneration  of  the  labourer  is,  of  course, 
not  settled  by  this  bargain.  Money  is  of  no  use  to 
him  any  more  than  to  others,  except  for  what  it  will 
fetch  (indeed,  as  his  wants  are  more  immediate  he 
feels  this  truth  more  than  most  others),  and  of  what 
use  it  will  be  is  settled  by  its  purchasing  power. 
This  is  again  but  a  new  case  of  supply  and  demand 


Cost  of  Production.  271 

in  the  full  sense  of  those  terms.  If  the  labourer  is 
needy  and  has  nothing  beforehand,  he  will  not  be 
able  to  make  his  money  go  so  far ;  he  will  be  obliged 
to  take  anything  which  the  shop-keeper  will  give  him. 
At  other  times,  he,  like  other  people,  may  buy  the 
goods  of  a  bankrupt,  "going  at  a  sacrifice".  He  is 
also  at  the  mercy  of  the  other  causes  which  raise  the 
price  of  the  articles  on  which  he  spends  his  money. 
A  short  harvest  will  send  up  the  price  excessively  by 
diminishing  the  supply  of  food  which  the  labourer 
wants  more  than  anything  else  in  the  world ;  the 
passage  of  an  army  through  the  district  will  just  as 
much  effect  this  by  introducing  new  mouths  to  be 
fed,  who  take  the  food  with  paying  for  it  or  without. 
The  real  remuneration  of  the  labourer  in  commodities 
is  settled  by  one  case  of  ordinary  exchange  against 
money,  just  as  the  money  price  of  that  labour  is 
settled  by  another. 

It  has,  indeed,  been  contended  that  there  is  some- 
thing special  in  the  article  "labour"  which  affects 
this  matter.  It  is  said  that  if  "  labour"  is  not  sold 
on  a  certain  day — that  is,  if  the  labourer  is  idle — 
that  labour  is  lost  in  consequence,  whereas  "com- 
modities "  are  permanent,  and  can  be  sold  one  day 
as  well  as  another.  But  many  commodities  are,  as 
we  all  know,  very  perishable,  and  are  so  without 
changing  the  principle  on  which  their  price  is 
settled.  And  hiring  a  man  and  hiring  a  horse  are 
obviously  acts  of  the  same  species.  The  laws 
which  settle  monetary  value  are  the  same  in  the 
case  of  labour  as  in  other  cases. 


^73 


APPENDIX. 

Note  A — (to  Page  139,  Line  16,  and  to  Page  231,  Line  5). 

The  account  of  the  market  price  given  in  the  text,  though 
long,  and  though,  I  trust,  complete  enough  for  its  purpose,  is 
not  complete,  and  I  should  like  to  add  to  it  a  little.  Political 
Economy  tends  to  become  unreal  if  it  stands  aloof  from  even 
the  minuticB  of  trading  transactions. 

First, — It  is  assumed  in  the  text  that  the  person  who  pro- 
poses to  sell  an  article  is  possessed  of  it,  is  a  "holder,"  as  we 
say  in  market  language  ;  but  nothing  can  be  more  untrue  than 
to  imagine  that  this  is  always  so  in  markets.  Many  persons 
perpetually  sell  what  they  do  not  possess,  and  this  great 
change,  as  is  natural,  makes  other  changes.  The  buyer's 
position  is  not,  indeed,  altered  ;  very  probably  he  neither  cares 
nor  knows  whether  the  person  proposing  to  deal  with  him 
does,  or  does  not,  possess  the  article ;  he  thinks  only  whether 
the  dealer  will,  or  will  not,  be  able  to  deliver  it;  if  he  gets  it 
in  time  to  satisfy  the  contract  that  is  all  which  he  cares  for. 
But  the  seller  has  a  new  point  to  think  of;  not  holding  the 
article  himself  he  must  consider  at  what  price  he  will  be  able 
to  obtain  it.  This  is  by  no  means  in  all  cases  an  easy  matter. 
The  Americans  have  invented  a  cant  word  for  an  organised 
mode  of  obstructing  it.  A  "corner,"  in  their  language,  is  a 
gang  of  persons  who,  having  heard  that  some  one  has  need  ol 
a  particular  article,  obtain  possession  of  the  whole  supply  of  it 
in  the  market,  and  will  only  sell  it  to  him  at  an  excessive 
price.  With  the  great  articles  of  consumption  this  attempt 
is  futile,  the  supply  of  them  is  too  large,  and  too  much  divided  ; 
but  with  articles  held  by  few  dealers  in  small  quantities — 
like  many  securities  of  minor  importance  on  the  Stock 
Exchange — such  a  plan  is  always  possible  and  often  profit- 
able ;  and  a  person  who  sells  what  he  has  not  got  must 
reckon  on   the  risk  of  it.      This  is  one  considerable  change 

18 


274  Appendix. 

from  the  circumstances  of  ordinary  bargains,  and  another  is 
that  no  one  makes  a  sale  of  this  sort  to  obtain  the  means  of 
meeting  a  liability.  In  common  business  it  often  happens 
that  a  man  must  sell  at  a  loss,  because  he  has  an  "  acceptance  " 
to  pay  next  day,  and  no  other  means  of  paying  it.  But  selling 
that  which  you  do  not  possess,  and  which  you  must  at  once 
buy  and  pay  for  elsewhere,  is  of  little  use  in  such  a  strait.  It 
may  bring  a  percentage  of  profit,  but  the  corpus  of  the  capital 
will  not  be  available  for  the  discharge  of  pre-existing  liabilities  ; 
it  will  be  immediately  paid  out  as  part  of  the  transaction 
which  brought  it  in. 

In  this  case,  therefore,  the  first  condition  of  the  formula 
must  be  modified,  and  the  early  part  of  it  will  run  :  — 

"  A  bargain  will  be  struck  when  the  seller  thinks  he  cannot 
obtain  more  from  the  buyer  with  whom  he  is  dealing,  or  from 
any  other  ; 

"  When  he  thinks  he  can  himself  obtain  the  article  at  a  less 
price,  and  is  willing  to  take  the  trouble  and  incur  the  risk  of 
attempting  to  do  so." 

And  the  rest  will  stand  as  in  the  text. 

Secondly, — There  is  a  corresponding  case  in  which  the 
buyer  has  not  the  money,  at  least  not  nearly  the  whole  of  it, 
at  the  time  he  makes  the  bargain.  In  Stock  Exchange  trans- 
actions this  is  exceedingly  common.  Many  buyers  cannot 
pay  for  the  securities  they  purchase  except  by  mortgaging 
those  securities;  many  banks  lend  on  them,  taking  a  ten  or  a 
twenty  per  cent,  margin,  as  it  may  be.  In  the  cotton  and 
other  produce  markets  there  are  similar  loans.  The  buyer 
has  only  a  fraction  of  the  purchase-money  himself,  he  borrows 
the  rest  on  the  goods  which  are  the  subject  matter  of  the 
transaction  in  order  to  complete  it.  In  this  case,  naturally, 
there  are  the  two  contrary  peculiarities  to  the  last ;  the  buyer 
has  to  consider  whether  he  thinks  he  will  be  able  to  borrow 
the  money,  and  whether  the  terms  on  which  he  will  borrow  it 
are  good  enough  to  make  the  transaction  worth  his  while. 
There  is,  in  this  case,  no  fear  of  his  being  "  cornered,"  at  least 
not  in  a  large  money  market  like  the  English  ;  the  voluntary 
operations  of  no  gang,  however  powerful,  would  ever  prevent 


Appendix.  275 

the  holder  of  good  securities  from  obtaining  money.  But  the 
involuntary  circumstances  of  all  dealers  may  prevent  him.  In 
a  panic  there  may  be  no  money  to  be  obtained,  and  he  may  be 
ruined  by  being  unable  to  complete  his  contract.  And  at  a  less 
excited  moment  scarcity  of  money  may  easily  raise  the  rate  of 
interest  to  a  point  so  high  as  to  turn  the  profit  he  expects  on 
the  transaction  into  a  loss.  In  consequence,  the  second  half 
of  the  first  condition  must  be  changed  into  this  :  — 

"When  the  buyer  thinks  he  can  borrow  the  requisite  money, 
and  when  he  is  sufficiently  desirous  of  the  article  to  make  him 
take  the  trouble  and  incur  the  risk  of  attempting  to  do  so". 

Till  now,  we  have  been  speaking  only  of  what  are  called 
"legitimate"  transactions — bargains,  that  is,  which  are  in- 
tended to  be  performed,  and  which  mostly  are  performed. 
But  there  is  another  great  class  of  contracts  which  are  not 
intended  to  be  performed  according  to  their  terms,  and  which 
are  not  so  performed.  These  are  "  time  bargains,"  of  which 
there  are  some  in  most  markets,  but  of  which  the  Stock  Ex- 
change is  the  great  seat.  It  is  as  common  as  anything  here 
that  a  man  should  buy  ;f 20,000,  say,  "  Peruvians,"  for  a  few 
days  only,  never  intending  to  pay  for  them,  and  never  intending 
to  take  them.  The  seller  on  his  side  understands  that  they  are 
not  meant  either  to  be  delivered,  or  to  be  paid  for.  The  real 
contract  is  different  from  the  verbal  one ;  it  is  that  on  the  day 
on  which  the  bargain,  according  to  its  terms,  is  to  be  per- 
formed— the  account  day  as  it  is  called — the  price  of  the  bar- 
gain is  to  be  compared  with  the  price  of  the  day,  and  that  the 
buyer  is  to  receive  the  difference,  if  the  price  of  the  day  is  the 
greater,  and  to  pay  the  difference  if  the  price  of  the  bargain — 
the  price  at  which  he  bought— is  the  greater.  In  plain  English, 
if  the  price  rises  between  the  time  of  the  purchase  and  the 
"  settlement "  the  buyer  is  to  have  the  difference  ;  if  it  falls, 
the  seller  is  to  have  it.  The  bargain  is,  in  fact,  a  bet  disguised 
as  a  sale.  Each  party  is  to  win  if  the  event  he  •'  backs  "  hap- 
pens, and  to  lose  if  it  does  not.  In  this  case  the  bargain  will 
be  struck  : — 

"  When  the  buyer  thinks  he  cannot  induce  the  seller  to  fix 
a  less  price  ; 


276  Appendix. 

"  When  he  thinks  this  price  likely  to  be  less  than  the  price 
on  the  future  day  of  settlement ; 

"When  he  thinks  the  chance  of  the  difference  he  will  re- 
ceive, if  his  anticipation  is  right,  worth  the  risk  of  that  which 
he  must  pay,  if  his  anticipation  is  wrong; 

"  When  the  seller  cannot  induce  the  buyer  to  name  a  greater 
price,  and  when  he  thinks  just  the  contrary  as  to  these  com- 
parative prices  and  their  resulting  difference." 

The  "bulls  "  are  speculators  of  this  kind,  who  buy;  and  the 
"bears"  speculators,  who  sell,  but  the  object  of  both  is  to 
gain  the  "difference":  the  former  being  sanguine,  and  think- 
ing the  price  will  rise ;  and  the  latter  being  gloomy,  and  ex- 
pecting it  to  fall.  It  curiously  happens,  I  believe,  that  the 
common  outside  public  are  almost  always  "bulls"— that  is, 
take  a  cheerful  view ;  and  that  it  is  the  inside,  or  professional 
operator,  who  expects  things  to  go  down.  And,  of  course,  the 
sanguine  people  are  those  who  lose ;  the  cool  inside  speculator 
lives  on  the  folly  of  the  outside  world. 

Time-  bargains  are,  more  than  any  others,  influenced  by 
preceding  bargains.  When  a  stock  is  rising,  many  people  will 
rush  to  bet  that  it  will  rise  more ;  when  it  is  sinking,  not  so 
many  people — but  still  many  people — will  be  eager  to  bet  that 
it  will  fall  further.  People  who  wish  to  bet  on  one  side  or  the 
other  naturally  choose  the  side  which  is  at  the  moment  winning, 
unless  they  have  a  reason  to  the  contrary — and  many  of  these 
speculators  seldom  have  much  reason.  In  consequence,  at- 
tempts to  rig  the  market  are  more  successful  in  this  kind  of 
business  than  in  any  other.  A  league  of  knowing  speculators, 
which  can  make  the  market  rise  a  little,  will  be  sure  to  be 
imitated  by  a  crowd  of  unknowing  ones,  and  will  be  able  to 
make  money  at  their  cost. 

Of  course  it  is  possible  to  pursue  these  transactions  upon  a 
sound  calculation.  If  a  man  has  a  real  reason  for  thinking 
that  a  stock  will  ultimately  rise  very  much,  he  may  succeed  by 
"time  bargains"  in  it.  But  those  who  have  a  sound  reason 
for  what  they  do,  and  those  who  gain  by  it,  are  few  in  com- 
parison with  those  who  have  only  fancies,  and  who  lose. 

There  is,  too.  an  obvious  defect  in  the  formula  of  the  text. 


Appendix.  277 

It  treats  "money,"  meaning  all  kinds  of  purchasing  power,  as 
if  they  were  the  same.  But  in  reality  they  are  different. 
"Cash  "  on  delivery  is  better  than  a  sale  on  credit,  or  than  the 
best  bill  at  a  long  rate.  The  ready-money  price  of  a  thing  is, 
in  consequence,  always  lower  than  the  credit  price  ; — at  least 
it  is  so  when  the  delivery  of  the  article  is  equally  immediate 
in  the  two  cases.  On  the  Stock  Exchange,  in  the  "Consol" 
market,  for  example,  it  is  occasionally  said  that  the  "ready- 
money"  price  is  greater  than  the  price  for  the  "account"  (the 
account  days  are  twice  a  month) ;  but  this  only  means  that 
the  stock  is  very  scarce,  and  that  in  consequence  it  is  much 
more  convenient  to  deliver  it  a  few  days  later  than  at  once. 
The  payment  and  the  delivery  are  in  both  cases  identical. 
Wherever  there  is  a  real  sale  on  credit  the  price  is  always 
higher  than  in  a  sale  for  cash,  because  the  buyer  loses  the 
use  of  the  money  for  a  time ;  and  the  credit  price  is  sometimes 
much  greater  because  the  buyer  may  not  be  a  man  in  much 
repute  ;  and  therefore,  the  seller  may  be  disposed  to  ask  a 
high  premium  for  placing  confidence  in  him,  and  he  may  be 
obliged  to  pay  it. 

The  use  of  the  formula  given  in  the  text  will,  however,  lead 
to  no  mistake  on  this  ground,  when  we  know  how  to  construe 
it.  A  credit  price  can  at  once  be  reduced  to  a  cash  price  as 
soon  as  we  know  the  time  for  which  it  was  given,  and  the 
degree  of  trust  reposed. 

There  are  also  two  speculative  difficulties  which  should  be 
cleared  away.  It  is  often  said  that  we  ought  to  include  in  the 
term  "  supply,"  or  whatever  equivalent  word  we  use,  not 
merely  the  supply  which  is  really  in  the  market,  but  that  which 
is  coming  to  it — as  it  is  phrased,  the  "prospective  "  supply, 
as  well  as  the  "  actual  ".  But  I  think  that  this  would  be  a  mis- 
take. In  the  first  place,  it  would  be  quite  contrary  to  the 
ordinary  phraseology  of  the  markets;  their  language  always 
distinguishes  that  which  is  on  the  spot  as  the  supply  par 
excellence.  And  it  is  always  most  unfortunate  in  an  abstract 
theory  to  use  a  word  in  one  sense  which  those  who  are  most 
concerned  with,  and  most  practically  skilled  in,  the  subject  of 
that  theory  use  in  a  different  sense.     The  consequent  puzzles 


278  Appendix. 

are  incessant  and  important.  And  in  this  case  the  language 
of  the  market  defines  a  vital  distinction.  There  is  a  great 
difference  between  that  part  of  the  supply  of  a  commodity 
which  can,  if  its  owners  choose,  be  used  to  make  good  a  con- 
tract, and  that  part  which  from  distance  or  incompleteness  of 
growth  or  make,  cannot  in  physical  possibility  be  so  used. 
The  actual  supply  for  the  purpose  of  any  bargain  is  that 
with  which  the  bargain  can  be  performed ;  this  is  what 
ordinary  dealers  would  say  they  dealt  in.  The  coming  supply, 
near  or  distant,  certain  or  uncertain,  complete  or  incomplete, 
influences  the  opinions  of  dealers  and  their  wishes;  it  makes 
them  more  or  less  anxious  to  keep  or  to  sell  the  actual  supply 
but  both  in  practical  effect  and  in  scientific  conception  the  two 
are  distinct. 

It  is  also  asked  whether,  when  we  say  that  "supply" 
influences  price,  we  mean  estimated  supply  or  real  supply.  In 
the  formula  of  the  text,  I  have  not  used  the  word  supply  for 
fear  of  ambiguity,  but  have  been  careful  to  say  '•  that  I  speak 
of  the  actual  quantity"  of  the  article  in  the  market.  The 
effect  of  this  is  very  great,  independently  of  the  estimate  of  it, 
because  the  dealers  who  hold  it,  especially  those  who  hold 
most  of  it,  are  in  general  somewhat  anxious  to  be  rid  of  it. 
What  each  man  holds,  and  what  he  has  to  sell,  is  a  much  more 
vital  thing  to  him  than  that  which  others  hold ;  a  little  addi- 
tion to  his  own  stock  is  apt  to  influence  him  much  more  than 
a  great  increase  to  the  stock  in  the  hands  of  others.  It  is  the 
"actual  supply  "  which  is  the  first  force  in  the  market,  because 
each  bit  of  it  acts  on  the  holder  of  that  bit,  and  mostly  guides 
him  more  than  anything  else. 

Of  course,  however,  the  '•  estimated  "  supply — the  notion 
every  dealer  has  about  the  amount  held  by  every  other  dealer — 
also  influences  all  transactions.  It  acts  on  the  mental  element, 
— on  opinion  and  on  desire.  According  as  it  is  less  or  more, 
it  makes  the  seller  less  or  more  likely  to  think  the  article  is 
likely  to  fall,  and  less  or  more  anxious  to  dispose  of  it.  But 
the  estimate  of  one  man  will  differ  from  that  of  another,  and 
the  effect  on  one  will  be  counteracted  by  the  effect  on  the  other, 
— and  we  must  not  confound  the  chance  results  of  these  varying 


Appendix.  279 

opinions  with  the  steady  desire  of  each  dealer  to  dispose  of 
his  own  article.  In  the  language  of  the  market,  "  supply  " 
means  real  supply,  and  in  discussions  about  markets,  it  is 
much  the  best  to  speak  in  the  same  way. 

Note  B — (to  Page  208). 

After  quoting  Mr.  Grote's  judgment  that  Mill  was  unrivalled 
m  the  power  to  compare  opposite  theories  of  the  same 
general  facts,  Mr.  Bagehot,  in  the  article  we  are  quoting 
from,  which  appeared  in  the  Economist  newspaper  on  the 
17th  May,  1873,  thus  proceeds :  "  In  Political  Economy 
there  was  an  eminent  field  for  John  Stuart  Mill's  peculiar 
powers  of  comparison.  There  is  little  which  is  absolutely 
original  in  his  great  work  ;  and  much  of  that  little  is  not,  we 
think,  of  the  highest  value.  The  subject  had  been  discussed 
in  detail  by  several  minds  of  great  acuteness  and  originality, 
but  no  writer  before  Mill  had  ever  surveyed  it  as  a  whole  with 
anything  like  equal  ability ;  no  one  had  shown  with  the  same 
fulness  the  relation  which  the  different  parts  of  the  science 
bore  to  each  other;  still  less  had  any  one  so  well  explained 
the  relation  of  this  science  to  other  sciences,  and  to  knowledge 
in  general.  Since  Mill  wrote,  there  is  no  excuse  for  a  Political 
Economist  if  his  teaching  is  narrow-minded  or  pedantic ; 
though,  perhaps,  from  the  isolated  state  of  the  science,  there 
may  have  been  some  before.  Mill  had  another  power,  which 
was  almost  of  as  much  use  to  him  for  his  special  occupations, 
as  his  power  of  writing,  he  was  a  most  acute  and  discerning 
reader.  The  world  hardly  gave  him  credit  for  this  gift  before 
the  publication  of  his  book  on  Sir  William  Hamilton.  But 
those  who  have  read  that  book  will  understand  what  Mr. 
Grote  means  when,  in  his  essay  on  Mill  in  the  Westminster 
Review,  he  speaks  of  Mill's  'unrivalled  microscope  which 
detects  the  minutest  breach  or  incoherence  in  the  tissue  of  his 
philosophical  reasoning'.  And  Mill  used  this  great  faculty 
both  good-naturedly  and  conscientiously  —  he  never  gave 
heedless  pain  to  any  writer,  and  never  distorted  any  one's 
meaning. 


28o  Appendix. 

"  In  Political  Economy  the  writer  of  these  lines  has  long 
been  in  the  habit  of  calling  himself  the  last  man  of  the  ante- 
Mill  period.  He  was  just  old  enough  to  have  acquired  a  cer- 
tain knowledge  of  Ricardo  and  the  other  principal  writers  on 
Political  Economy,  before  Mill's  work  was  published;  and 
the  effect  of  it  has  certainly  been  most  remarkable.  All 
students  since,  begin  with  Mill  and  go  back  to  all  previous 
writers  fresh  from  the  study  of  him.  They  see  the  whole 
subject  with  Mill's  eyes.  They  see  in  Ricardo  and  Adam 
Smith  what  he  told  them  to  see,  and  it  is  not  easy  to  induce 
them  to  see  anything  else.  Whether  it  has  been  altogether 
good  for  Political  Economy  that  a  single  writer  should  have  so 
monarchical  an  influence,  may  be  argued,  but  no  testimony 
can  be  greater  to  the  ability  of  that  writer  and  his  pre-emin- 
ence over  his  contemporaries." 


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Trevelyan.— THE  AMERICAN  RE- 
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Trevelyan.— ENGLAND  IN  THE  AGE 
OF  WYCLIFFE.  By  George  Macau- 
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8       LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS. 


History,  Politics,  Polity,  Political  Memoirs,  etc. — continued. 


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Walpole.— HISTORY  OF  ENGLAND 
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HISTORY  OF  ENGLAND  UNDER 
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BERNARDS  (THE)  OF  ABINGTON 
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Blount.— THE  MEMOIRS  OF  SIR 
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Dante.— THE  LIFE  AND  W^ORKS  OF 
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Hunter. —  THE    LIFE    OF    SIR 
WILLIAM       WILSON        HUNTER, 
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lo     LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS. 


Biography,  Personal  Memoirs,  etc. — continued. 


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Shakespeare.— OUTLINES  OF  THE 
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Walpole.  —  SOME  UNPUBLISHED 
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Wellington.— LIFE  OF  THE  DUKE 
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OUR  HOME  ON  THE  OCEAN  FOR 

ELEVEN  MONTHS. 

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THE       GREAT       DESERTS       AND 

FORESTS  OF  NORTH    AMERICA. 

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R.E.,  A.  H.  Boyd,  W.  J.  Ford, 
etc.  With  11  Plates,  19  Illustrations 
in  the  Text,  and  numerous  Diagrams. 
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COURSING  AND  FALCONRY,  By 
Harding  Cox,  Charles  Richardson, 

etc.  With  20  Plates  and  55  Illustrations 
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CRICKET.  By  A.  G.  Steel,  the  Hon. 
R.  H.  Lyttelton,  a.  Lang,  W.  G. 
Grace,  etc.  With  13  Plates  and  52  Illus- 
trations in  the  Text.  Crown  Svo,  cloth, 
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CYCLING.  By  the  Earl  of  Albemarle 
and  G.  Lacy  Hillier.  With  19  Plates 
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DANCING.  By  Mrs.  Lilly  Grove,  etc. 
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DRIVING.  By  His  Grace  the  (Eighth) 
Duke  of  Beaufort,  K.G.,  A.  E.  T. 
Watson,  etc.  With  12  Plates  and  54 
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FENCING,  BOXING  AND  WREST- 
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FISHING.       By     H.     Cholmondelbt- 
Pennell. 

Vol.  I.— Salmon  and  Trout.  With 
Contributions  by  H.  R.  Francis, 
Major  John  P.  Traherne,  etc.  With 
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Vol.  II.— Pike  and  Other  Coarse  Fish. 

With  Contributions  by  William 
Senior,  G.  Christopher  Davis,  etc. 
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tions of  Tackle,  etc.  Cr.  Svo,  cloth,  6s. 
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FOOTBALL.— By  Montague  Shearman, 
W.  J.  Oakley,  Frank  Mitchell,  etc. 
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GOLF.  By  Horace  G.  Hutchinson, 
the  Rt.  Hon.  A.  J.  Balfour,  M.P., 
Andrew  Lang,  etc.  With  34  Plates 
and  56  Illustrations  in  the  Text.  Cro^vn 
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Longmans  And  co.'s  standard  and  general  worjcs.   t^ 


Sport  and  Pastime — continued, 
THE  BADMINTON  \ABR\R\— continued. 

Edited  by  His  Gbaob  thb  (Eighth)  DUKE  OF  BEAUFORT,  K.G.,  and 
A.  E.  T.  WATSON. 


HUNTING.  By  His  Grace  the  (Eighth) 
DuKB  OF  Beaufort,  K.G.,  Mowbray 
Morris,  G.  H.  Longman,  etc.  With  5 
Plates  and  54  Illustrations  in  the  Text. 
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MOTORS  AND  MOTOR-DRIVING.  By 
Alfred  C.  Harmsworth,  the  Hon. 
John  Scott-Montagu,  etc.  With  13 
Plates  and  136  Illustrations  in  the  Text. 
Crown  8vo,  cloth,  9a\  net ;  half-bound, 
12s.  net.  A  Cloth  Box  for  use  when 
Motoring,  price  2s.  net. 

MOUNTAINEERING.  By  C.  T.  Dent, 
the  Right  Hon.  J.  Bryce,  M.P.,  Sir 
Martin  Conway,  etc.  With  13  Plates 
and  91  Illustration^  in  the  Text.  Crown 
8vo,  cloth,  6s.  net ;  half-bound,  with  gilt 
top,  9s.  net. 

POETRY  OF  SPORT  (THE).  Selected 
by  Hedley  Peek.  With  32  Plates  and 
74  Illustrations  in  the  Text.  Cr.  8vo, 
cloth,  6s.  net ;  half-bound,  with  gilt 
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RACING  AND  STEEPLE-CHASING. 
By  the  Earl  of  Suffolk  and  Berk- 
shire, W.  G.  Craven,  the  Hon.  P. 
Lawley,  etc.  With  Frontispiece  and  56 
Illustrations  in  the  Text.  Cr.  8vo,  cloth, 
6s.  net ;  half-bound,  with  gilt  top,  9s.  net. 

RIDING  AND  POLO.  By  Captain 
Robert  Weir,  J.  Moray  Brown,  T. 
F.  Dale,  the  late  Duke  of  Beaufort, 
etc.  With  18  Plates  and  41  Illustra- 
tions in  the  Text.  Crown  8vo,  cloth,  6s. 
net ;  half-bound,  with  gilt  top,  9s.  net. 

ROWING.  By  R.  P.  P.  Rowe  and  C.  M. 
Pitman,  etc.  With  75  Illustrations. 
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SEA  FISHING.  By  John  Bickerdyke, 
Sir  H.  W.  Gore-Booth,  Alfred  C. 
Harmsworth,  and  W.  Senior.  With 
22  Full-page  Plates  and  175  Illustrations 
in  the  Text.  Crown  8vo,  cloth,  6s.  net ; 
half-bound,  with  gilt  top,  9s.  net. 


SHOOTING. 

Vol.  I.— Field  and  Covert.  By  Lord 
Walsingham,  Sir  Ralph  Payne- 
Gall  wey,  Bart.,  etc.  With  11  Plates 
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Vol.  II.— Moor  and  Marsh.  By 
Lord     Walsingham,     Sir     Ralph 

'  Payne-Gall  wey,  Bart.,  etc.  With  8 
Plates  and  57  Illustrations  in  the  Text. 
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SKATING,  CURLING,  TOBOGGANING. 
By  J.  M.  Heathcote,  C.  G.  Tebbutt, 
T.  Maxwell  Witham,  etc.  With  12 
Plates  and  272  Illustrations  in  the  Text. 
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SWIMMING.  By  Archibald  Sinclair 
and  William  Henry.  With  13  Plates 
and  112  Illustrations  in  the  Text.  Cr. 
8vo,  cloth,  6s.  net ;  half-bound,  with 
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TENNIS,  LAWN  TENNIS,  RACKETS 
AND  FIVES.  By  J.  M.  and  C.  G. 
Heathcote,  E.  0.  Pleydell-Bouverie, 
the  Hon.  A.  Lyttelton,  etc.  With  12 
Plates  and  67  Illustrations  in  the  Text, 
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YACHTING. 
Vol.  I.— Cruising,  Construction  of 
Yachts,  Yacht  Racing  Rules, 
Fitting-Out,  etc.  By  Sir  Edward 
Sullivan,  Bart.,  the  Earl  of  Pem- 
broke, Loud  Brassey,  K.C.B.,  etc. 
With  21  Plates  and  93  Illustrations 
hi  the  Text.  Crown  8vo,  cloth,  Qs. 
net ;  half-bound,  with  gilt  top,  9s.  net. 
Vol.  II. — Yacht  Clubs,  Yachting  in 
America  and  the  Colonies,  Yacht 
Racing,  etc.  By  R.  T.  Pritchett, 
the  Marquis  of  Dufferin  and  Ava, 
K.P.,  etc.  With  35  Plates  and  160 
Illustrations  in  the  Text.  Crown  8vo, 
cloth,  Qs.  net ;  half-bound,  with  gilt 
top,  9s.  net. 


t4    LONGMANSIAND  GO.'S  STANDARD  AND  GENERAL   WORJtS. 


Sport  and  Pastime — continued. 

FUR,  FEATHER,  AND  FIN  SERIES. 

Edited  by  A.  E.  T.  Watson. 

CroYra  8vo,  price  5s.  each  Volume,  cloth. 

The  Volumes  are  also  issued  half-bound  in  Leather,  with  gilt  top.     Price 
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THE  PARTRIDGE.  Natural  History, 
by  the  Rev.  H.  A.  Macpherson  ; 
Shooting,  by  A.  J.  Stuart- Wortley  ; 
Cookery,  by  George  Saintsbury. 
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THE  GROUSE.  Natural  History,  by 
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ing, by  A.  J.  Stuart-Wortley  ; 
Cookery,  by  George  Saintsbury. 
Witli  13  Illustrations  and  various  Dia- 
grams.    Crown  8vo,  5s. 

THE  PHEASANT.  Natural  History, 
by  the  Rev.  H.  A.  Macpherson  ;  Shoot- 
ing, by  A.  J.  Stuart-Wortley  ; 
Cookery,  by  Alexander  Innes  Shand. 
With  10  Illustrations  and  various  Dia- 
grams.    Crown  Svo,  05. 

THE  HARE.  Natural  History,  by  the 
Rev.  H.  A.  Macpherson  ;  Shooting, 
by  the  Hon.  Gerald  Lascelles  ; 
Coursing,  by  Charles  RicHARDscfN ; 
Hunting,  by  J.  S.  Gibbons  and  G.  H. 
Longman  ;  Cookery,  by  Col.  Kenney 
Herbert.  With  9  Illustrations.  Crown 
Svo,  55. 


r  RED  DEER.     Natural  History,  by  the 
I     Rev.  H.  A.  Macpherson  ;  Deer  Stalk- 
I     ING,  by  Cameron  of  Lochiel  ;  Stag 
Hunting,    by    Viscount    Ebrington  ; 
Cookery,  by  Alexander  Innes  Shand. 
With  10  Illustrations.     Crown  Svo,  55. 
THE    SALMON.      By  the   Hou.   A.   B. 
Gathorne-Hardy.     With  Chapters  on 
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Douglas  Pennant;  Cookery,  by  Alex- 
ander Innes  Shand.     With  8  Illustra- 
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THE  TROUT.  By  the  Marquess  of 
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Cookery,  by  Alexander  Innes  Shand. 
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THE  RABBIT.  By  James  Edmund 
Harting.  Cookery,  by  Alexander 
Innes  Shand.  With  10  Illustrations. 
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PIKE  AND  PERCH.  By  William  Senior 
(' Redspinner,"  Editor  of  the  Field). 
With  Chapters  by  John  Bickerdykb 
and  W.  H.  Pope.  Cookery,  by  Alex- 
ander Inntis  Shand.  With  12  Illustra- 
tions.    Crown  Svo,  5s. 


Alverstone  and  Alcock.— SURREY 
CRICKET:  Its  History  and  Associa- 
tions. Edited  by  the  Right  Hon.  Lord 
Alverstone,  L.C.J.,  President,  and  C. 
W.  Alcock,  Secretary,  of  the  Surrey 
County  Cricket  Club.  With  48  Illus- 
trations.    Svo,  16.S-.  net. 


Bickerdyke.— DAYS  OF  MY  LIFE 
ON  WATER,  FRESH  AND  SALT: 
and  other  papers.  By  John  Bicker- 
dyke.  With  Photo- Etching  Frontis- 
piece and  8  Full-page  Illustrations. 
Crown  Svo,  3s.  Qd. 


Blaekburne.— MR.  BLACKBURNE'S 
GAMES  AT  CHESS.  Selected,  An- 
notated and  Arranged  by  Himself. 
Edited,  with  a  Biographical  Sketch 
and  a  brief  History  of  Blindfold  Chess, 
by  P.  Anderson  Graham.  With  Por- 
trait of  Mr.  Blaekburne.  Svo,  7s.  &d.  net. 

Dead  Shot  (The)  :  or.  Sportsman's 
Complete  Guide.  Being  a  IVeatise  on 
the  use  of  the  Gun,  with  Rudimentary 
aud  Finishing  Lessons  in  the  Art  of 
Shooting  Game  of  all  kinds.  Also 
Game-driving,  Wildfowl  and  Pigeon- 
Shooting,  Dog-breaking,  etc.  By 
Marksman.  With  numerous  Illustra- 
tions.    Crown  Svo,  10s.  Qd. 


LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS.     15 


Sport  and  Pastime — continued 

Ellis.— CHESS  SPARKS;  or,  Short  and    Lillie.— CROQUET 
Bright  Games  of  Chess.     Collected  and 
Arr.inged  by  J.  H.  Ellis,  M.A.     8vo, 
45.  6rf. 


Polkard.— THE  WILD-FOWLER:  A 
Treatise  on  Fowling,  Ancient  and 
Modem,  descriptive  also  of  Decoys  and 
Flight-ponds,  Wild-fowl  Shooting, 
Ginudng-punts,  Shooting-yachts,  etc. 
Also  Fowling  in  the  Feus  and  in  For- 
eign Countries,  Rock-fowling,  etc.,  etc. 
By  H.  C.  FOLKARD.  With  13  Engrav- 
ings on  Steel,  and  several  Woodcuts. 
8vo,  \2s.  Qd. 

Ford.— THE  THEORY  AND  PRAC- 
TICE OF  ARCHERY.  By  Horace 
Ford.  New  Edition,  thoroughly  Re- 
vised and  Rewritten  by  W.  Bdtt,  M.A. 
With  a  Preface  by  C.  J.  Longman,  M.A. 
8vo,  14s. 

Francis.— A  BOOK    ON  ANGLING: 

or.  Treatise  on  the  Art  of  Fishing  in 
every  Branch  ;  including  full  illustrated 
List  of  Salmon  Flies.  By  Francis 
Francis.  With  Portrait  and  Coloured 
Plates.     Crown  8vo,  15s. 

Fremantle.— THE  BOOK  OF  THE 
RIFLE.  By  the  Hon.  T.  F.  Fre- 
mantle, V.D.,  Major,  1st  Bucks  V.R.C. 
With  54  Plates  and  107  Diagrams  in  the 
Text.     8vo,  125.  6rf.  net. 

Gathorne-Hardy.— AUTUMNS  IN 
ARGYLESHIRE  WITH  ROD  AND 
GUN.  By  the  Hon.  A.  E.  Gathorne- 
Hardy.  With  8  Photogravure  Illus- 
trations by  Archibald  Thorbdrn. 
8vo,  6s.  net. 

Graham.  —  COUNTRY  PASTIMES 
FOR  BOYS.  By  P.  Anderson  Gra- 
ham. With  252  Illustrations  from 
Drawings  and  Photographs.  Crown 
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Hutchinson.— THE  BOOK  OF  GOLF 
AND  GOLFKRS.  By  Horace  G. 
Hdtchinson.  With  Contributions  by 
Miss  Amy  Pascob,  H.  H.  Hilton, 
J.  H.  Taylor,  H.  J.  Whigham  and 
Messrs.  Sctton  &  Sons.  With  71 
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Lang.— ANGLING  SKETCHES.  By 
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Crown  8vo,  3«.  Qd. 


UP    TO     DATE, 

Containing  the  Ideas  and  Teachings  of 
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Locoek.— SIDE  AND  SCREW  :   being 
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Longman.— CHESS  OPENINGS.     By 
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Mackenzie.— NOTES  FOR  HUNTING 
MEN.   By  Captain  Cortlandt  Gordon 
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Madden.— THE  DIARY  OF  MASTER 
WILLIAM    SILENCE:    a    Study    of 
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Maskelyne.— SHARPS  AND  FLATS  : 
a  Complete  Revelation  of  the  Secrets  of 
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Skill.    By  John  Nevil  Maskelyne,  of 
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Millais  (John  Goille). 
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Park.— THE  GAME  OF  GOLF.  By 
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i6    LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


Sport  and  Pastime — continued. 


Payne-G-all-wey  (Sir  Ralph,  Bart.). 
THE  CROSS-BOW  :  its  History,  Con- 
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LETTERS    TO    YOUNG    SHOOTERS 

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S  e  1  o  u  s.  —  SPORT  AND  TRAVEL, 
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LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS.     17 


Mental,  Moral  and  Political  Philosophy — continued. 


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24     LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS. 


Poetry  and  the  Drama — continued. 


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25 


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26     LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


Fiction,  Humour,  etc. — continued. 


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LONGMANS  AND  CO:S  STANDARD  AND  GENERAL  WORKS,     v) 


Fiction,  Humour,  etc. — continued. 


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THE  WELL  AT  THE  WORLD'S  END. 

2  vols.     Svo,  2Ss. 

THE  WOOD  BEYOND  THE  WORLD. 

Crown  Svo,  6s.  net. 

THE  STORY  OF  THE  GLITTERING 
PLAIN,  which  has  been  also  called 
The  Land  of  the  Living  Men,  or  The 
Acre  of  the  Undying.  Square  post 
Svo,  5s.  net. 

THE  ROOTS  OF  THE  MOUNTAINS, 
wherein  is  told  somewhat  of  the  Lives 
of  the  Men  of  Burgdale,  their  Friends, 
their  Neighbours,  their  Foeraen,  and 
tlieir  Fellows-in-Arms.  Written  in 
Prose  and  Verse.  Square  cr.  Svo, 
8s. 

A  TALE  OF  THE  HOUSE  OF  THE 
WOLFINGS,  and  all  the  Kindreds  of 
the  Mark.  Written  in  Prose  and 
Verse.      Square   crown  Svo,  6s. 

A  DREAM  OF  JOHN  BALL,  AND 
A  KING'S  LESSON.     12mo,  Is.  Qd. 

NEWS  FROM  NOWHERE:  or,  An 
Epoch  of  Rest.  Being  some  Chapters 
from  an  Utopian  Romance.  Post  Svo, 
Is.  6^;. 

THE  STORY  OF  GRETTIR  THE 
STRONG.  Translated  from  the  Ice- 
landic by  EiRiKR  Magn(5sson  and 
William  Morris.  Crown  Svo,  5s. 
net. 

THREE  NORTHERN  LOVE 
STORIES,  and  other  Tales.  Trans- 
lated from  the  Icelandic  by  EirIkr 
Maonosson  and  William  '  Morris. 
Crown  Svo,  6s.  net. 

*^*  For  Mr.    William   Morris's  other 
Works,  see  pp.  24,  37  and  40. 


28     LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS. 


Fiction,  Humour,  etc. — continued. 


Ne-wman  (Caedinal). 
LOSS  AND  GAIN  :    The  Story  of  a  i 
Convert.     Crown  8vo,  35.  6rf.  \ 

CALLISTA :     a    Tale    of    the    Third 
Century.     Crown  8vo,  3s.  M.  \ 


Phillipps-WoUey.— SNAP  :  A  Le- 
gend of  the  Lone  Mountain.  By  C. 
Phillipps-Wollet.  With  13  Illustra- 
tions.     Crown  8vo,  3s.  ^d. 


Ridley.— ANNE  MAIN  WARING.  By  \ 
Alice  Ridley,  Author  of  '  The  Story  of 
Aline '.     Crown  8vo,  6s. 


Sewell  (EUZABETH  M.). 
A  Glimpse  of  the  World. 
Laneton  Parsonage. 
Margaret  Percival. 
Katherine  Ashton. 
The  Earl's  Daughter. 
The  Experience  of  Life. 


Amy  Herbert. 
Cleve  Hall. 
Gertrude. 
Home  Life. 
After  Life. 
Ursula.  Ivors. 


Crown  8vo,  cloth  plain,  Is.  6c?.  each  ; 
cloth  extra,  gilt  edges,  2s.  ^d. 
each. 


Stevenson  (Robert  Louis). 

THE  STRANGE  CASE  OF  DR. 
JEKYLL  AND  MR.  HYDE.      Fop. 

8vo,  Is.  sewed,  Is.  6rf.  cloth. 

THE  STRANGE  CASE  OF  DR. 
JEKYLL  AND  MR.  HYDE,  WITH 
OTHER  FABLES.  Cr.  8vo,  bound 
in  buckram,  with  gilt  top,  5s.  net. 

'  Silver  Library '  Edition.      Crown 
8vo,  3s.  6c?. 

MORE  NEW  ARABIAN  NIGHTS 
—THE  DYNAMITER.  By  Robert 
LoDis  Stevenson  and  Fanny  van 
DE  Grift  Stevenson.  Crown  8vo, 
3s.  %d. 

THE    WRONG    BOX.      By   Robert 

Louis    Stevenson    and    Lloyd   Os- 
BOURNE.      CYown  Bvo,  3s.  &d. 


Suttner.— LAY  DOWN  YOUR  ARMS 

(Die  Waffen  Nieder)  :  The  Autobio- 
graphy of  Martha  von  Tilling.  By 
Bertha  von  Suttner.  Translated  by 
T.  Holmes.     Crown  8vo,  Is.  &d. 


Swan.— BALLAST. 
Crown  8vo,  6s. 


By  Myra  Swan, 


Sheehan.— LUKE  DELMEGE.  By  the  ! 
Rev.  P.  A.  Sheehan,  P.P.,  Author  of 
'  My  New  Curate  '.     Crown  8vo,  6s. 


Somerville     (E.    (E.)    and     Boss 
(Martin). 

SOME  EXPERIENCES  OF  AN 
IRISH  R.M.  With  31  Illustrations 
by  E,  OE.  Somerville.  Crown  8vo, 
6s. 

THE  REAL  CHARLOTTE.  Crown 
8vo,   3s.  &d. 

THE  SILVER  FOX.  Crown  8vo, 
8s.  M. 


Stebbing.  —  RACHEL  WULFSTAN, 
and  other  Stories.  By  W.  Stebbing, 
author  of  '  Probable  Tales  '.  Crown 
8vo,  4s.  Qd. 


Trollops  (Anthony). 

THE  WARDEN.     Crown  8vo,  Is.  6c;. 

BARCHESTER  towers.   Crown  8vo, 
Is.  U. 


Walford  (L.  B.). 

CHARLOTTE.     Crown  8vo,  6s. 

ONE  OF  OURSELVES.     Cr.  8vo,  6s. 

THE  INTRUDERS.     Cr,  8vo,  2s.  Qd. 

LEDDY  MARGET.     Cr.  8vo,  2s.  6c?. 

IVA   KILDARE  :   a   Matrimonial   Pro- 
blem.     Crown  8vo,  2s.  M. 

MR.  SMITH  :  a  Part  of  his  Life.     Cr. 
8vo,  2s.  Gd. 

THE      BABY'S      GRANDMOTHER. 
Crown  8vo,  2s.   Qd. 


LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS,    ag 


Fiction,  Humour,  etc. — continued. 


"Walford  (L.  B. ) — continued. 

COUSINS,     Crown  8vo,  2s.  Qd. 

TROUBLESOME  DAUGHTERS. 
8vo,  25.  Qd. 


Or. 


PAULINE.     Crown  8vo,  2s.  %d. 

DTCK  NETHERBY.     Cr.  8vo,  2s.  M.     \ 

I 

THE  HISTORY  OF  A  WEEK.      Cr.  | 

8vo,  2s.  Qd.  ; 

A    STIFF-NECKED    GENERATION. 
Crown  8vo,  2s.  Qd. 


NAN,  and  other  Stories 
2s.  &d. 


THE  MISCHIEF  OF  MONICA. 
8vo,  2s.  &d. 


Crown  8vo, 
Cr. 
Crown 


THE  ONE    GOOD    GUEST, 
8vo,  2s.  Qd. 

'  PLOUGHED.'  and  other  Stories.     Cr. 
8vo,  2s.  Qd. 

THE   MATCHMAKER.     Crown    8vo, 
2s.  Qd. 


Ward.— ONE  POOR  SCRUPLE.      By 
Mrs.   Wilfrid    Ward.       Crown  8vo, 


Wesnnan  (Stanlbt). 

THE  HOUSE  OF  THE  WOLF.  With 
Frontispiece  and  Vignette.  Crown 
8vo,  3s.  Qd. 

A  GENTLEMAN  OF  FRANCE.  With 
Frontispiece  and  Vignette.  Crown 
8vo,  6s. 

THE  RED  COCKADE.  With  Frontis- 
piece and  Vignette.     Crown  8vo,  6s. 

SHREWSBURY.  With  24  Illustra- 
tions by  Claude  A.  Shepperson. 
Cr.  8vo.  6s. 

SOPHIA.  With  Frontispiece.  Crown 
8vo,  6s. 


Yeats  (S.  Levett). 

THE   CHEVALIER  D'AURIAC.     Cr. 
8vo,  3s.  Qd. 

THE  TRAITOR'S  WAY.     Crown  8vo, 
6s. 


Yoxall.— THE  ROMMANY  STONE. 
By  J.  H.  Yoxall,  M.P.  Crown  8vo, 
6s. 


Popular  Science  (Natural  History,  etc.). 


Butler.  —  OUR  HOUSEHOLD  IN- 
SECTS. An  Account  of  the  Insect- 
Pests  found  in  Dwelliiig-Houses.  By 
Edward  A.  Butler,  B.A.,  B.Sc. 
(Lond.).  With  113  Illustrations.  Cr. 
8vo,   3s.  Qd. 

Purneaux  (W.). 

THE  OUTDOOR  WORLD;  or.  The 
Young  Collector's  Handbook.  With 
18  Plates  (16  of  which  are  coloured), 
and  549  Illustrations  in  the  Text. 
Crown  8vo,  gilt  edges,  6s.  net. 


Furneaux  ( W. )— continued. 

BUTTERFLIES  AND  MOTHS 
(British).  With  12  coloured  Plates 
and  241  Illustrations  in  the  Text. 
Crown  8vo,   gilt  edges,  6s.   net. 

LIFE  IN  PONDS  AND  STREAMS. 
With  8  coloured  Plates  and  331  Illus- 
trations in  the  Text.  Cr.  8vo,  gilt 
edges,  6s.  net 


30    LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


Popular  Science  (Natural 

Hartwig  (George).  | 

THE  SEA  AND  ITS  LIVING  WON-  \ 
DERS.  With  12  Plates  and  303  j 
Woodcuts.     8vo,  gilt  top,  7s.  net. 

THE  TROPICAL  WORLD.      With  8  | 
Plates  and  172  Woodcuts.     8vo,  gilt 
top,  Is.  net. 

THE  POLAR  WORLD.     With  3  Maps,  ' 
8  Plates  and  85  Woodcuts.     8vo,  gilt 
top,  7s.  net. 

THE      SUBTERRANEAN     WORLD. 

With  3  Maps  and  80  Woodcuts.     8vo, 
gilt  top,  7s.  net. 

Helmholtz.— POPULAR  LECTURES 
ON  SCIENTIFIC  SUBJECTS.  By 
Hermann  von  Helmholtz.  With  68 
Woodcuts.  2  vols.  Cr.  8vo,  3s.  6c/. 
each. 

Hudson  (W.  H.). 

BIRDS  AND  MAN.  Large  Crown 
8vo,  6s.  net. 

NATURE  IN  DOWNLAND.  With  12 
Plates  and  14  Illustrations  in  the 
Text,  by  A.  D.  McCORMiCK.  8vo, 
10s.  Qd.  net. 

BRITISH  BIRDS.  With  a  Chapter  on 
Structure  and  Classification  by  Frank 
E.  Beddard,  F.R.S.  With  16  Plates 
(8  of  which  are  Coloured),  and  over 
100  Illustrations  in  the  Text.  Crown 
8vo,  gilt  edges,  6s.  net. 

Millais.— THE  NATURAL  HISTORY 
OF  THE  BRITISH  SURFACE-FEED- 
ING DUCKS.  By  John  Gdille 
Millais,  F.Z.S.,  etc.  With  6  Photo- 
gravures and  66  Plates  (41  in  Colours) 
from  Drawings  by  the  Author,  Archi- 
bald Thorburn,  and  from  Photographs. 
Royal  4to,  i;6  6s. 

Proctor  (Richard  A.). 

LIGHT  SCIENCE  FOR  LEISURE 
HOURS.  Familiar  Essays  on  Scien- 
tific Subjects.     Crown  8vo,  3s.  M. 

ROUGH  WAYS  MADE  SMOOTH. 
Familiar  Essays  on  Scientific  Subjects. 
Crown  8vo,  3s.  M. 


History,  etc.) — continued. 
Proctor  (Richard  A. )— continued. 

PLEASANT  WAYS  IN  SCIENCE. 
Crown  8vo,   3s.   Qd. 

NATURE  STUDIES.  By  R.  A.  Proc- 
tor, Grant  Allen,  A.  Wilson,  T. 
Foster  and  E.  Clodd.  Cr.  8vo,  3s.  Qd. 

LEISURE  READINGS.  By  R.  A. 
Proctor,  F1.  Clodd,  A.  Wilson,  T. 
Foster  and  A.  C.  Ranyard.  Crown 
8vo,  3s.  Qd. 

*,*  Ffjr  Mr.  Proctur^s  otfter  books  tee 
}jp.  16  and  35  and  Messrs.  Lofujmans  A 
Co.'s  Colalogue  of  Scientific  Works. 


Stanley.— A  FAMILIAR  HISTORY 
OF  BIRDS.  By  E.  Stanley,  D.D., 
formerly  Bishop  of  Norwich.  With  160 
Illustrations.     Crown  8vo,  3s.  Qd. 


Wood  (Rev.  J.  G.). 

HOMES  WITHOUT  HANDS :  A  De- 
scription of  the  Habitations  of  Animals, 
classed  according  to  their  Principle  of 
Construction.  With  140  Illustrations. 
8vo,  gilt  top,  7s.  net. 

INSECTS  AT  HOME:  A  Popular 
Account  of  British  Insects,  their 
Structure,  Habits  and  Transforma- 
tions. With  700  Illustrations.  8vo, 
gilt  top,  7s.  net. 

INSECTS  ABROAD  :  A  Popular  Ac- 
count of  Foreign  lusects,  their 
Structure,  Habits  and  Transforma- 
tions. With  600  Illustrations.  8vo, 
7s.  net. 

OUT  OF  DOORS  :  a  Selection  of 
Original  Articles  on  Practical  Natural 
History.  With  11  Illustrations.  Cr. 
8vo,  3s.  M. 

PETLAND  REVISITED.  With  33 
Illustrations.     Crown  8vo,  3s.  6rf. 

STRANGE  DWELLINGS  :  a  Descrip- 
tion of  the  Habitations  of  Animals, 
abridged  from  '  Homes  without 
Hands'.  With  60  Illustrations.  Cr. 
8vo,  3s.  Qd. 


LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS.    31 


Qwilt.— AN  ENCYCLOPiEDIA  OF 
ARCHITECTURE.  By  J  oseph  Gwilt, 
F.S.A.  With  1700  Engravings.  Revised 
(1888),  with  alterations  and  Considerable 
Additions  by  Wyatt  Papwobth.  8vo, 
2\s.  net. 


Longmans'  GAZETTEER  OF  THE 
WORLD.  Edited  by  George  G.  Chis- 
HOLM,  M.A.,  B.Sc.  Imperial  8vo,  I85. 
net ;  cloth,  21s.  lialf-inorocco. 


Maunder  (Samuel). 

BIOGRAPHICAL  TREASURY.  With 
Supplement  brought  down  to  1889. 
By  Rev.  James  Wood.     Fcp.  8vo,  6s. 

THE  TREASURY  OF  BIBLE  KNOW- 
LEDGE. By  the  Rev.  J.  Ayre,  M.A. 
With  5  Maps,  15  Plates,  and  300  Wood- 
cuts.    Fcp.  8vo,  6s. 

TREASURY  OF  KNOWLEDGE  AND 
LIBRARY  OF  REFERENCE.  Fcp. 
8vo,  6s. 


Works  of  Reference. 

Maunder  (Samubl) — continued. 
THE     TREASURY     OF      BOTANY. 


Edited  by  J.  Lindley,  F.R.S.,  and  T. 
Moore,  F.L.S.  With  274  Woodcuts 
and  20  Steel  Plates.  2  vols.  Fcp. 
8vo,  12s. 


Roget.— THESAURUS  OF  ENGLISH 
WORDS  AND  PHRASES.  Classified 
and  Arranged  so  as  to  Facilitate  the 
Expression  of  Ideas  and  assist  in  Literary 
Composition.  By  Peter  Mark  Rooet, 
M.D.,  F.R.S.  Recomposed  throughout, 
enlarged  and  improved,  partly  from  the 
Author's  Notes,  and  with  a  full  Index,  by 
the  Author's  Son,  John  Lewis  Roget. 
Crown  8vo,  9s.  net. 


Willich.— POPULAR      TABLES     for 

giving  information  for  ascertaining  the 
value  of  Lifehold,  Leasehold,  and  Church 
Property,  the  Public  Funds,  etc.  By 
Charles  M.  Willich.  Edited  by  H. 
Bence  Jones.     Crown  8vo,  10s.  &d. 


Children's  Books. 


Adelborg.  —  CLEAN  PETER  AND 
THE  CHILDREN  OF  GRUBBYLEA. 
By  Ottilia  Adelbokg.  Translated 
from  the  Swedish  by  Mrs.  Graham 
Wallas.  With  23  Coloured  Plates. 
Oblong  4to,  boards,  3s.  Qd.  net. 

Alick's    Adventures.      By    G.    R. 

With  8  Illustrations  by  John  Hassall. 
Crown  8vo,  3s.  Qd. 

Brown.— THE  BOOK  OP  SAINTS 
AND  FRIENDLY  BEASTS.  By 
Abbie  Fauwell  Brown.  With  8 
Illustrations  by  Fanny  Y.  Cory.  Cr. 
8vo,  4s.  60!.  net. 

Buckland.— TWO  LITTLE  RUN- 
AWAYS. Adapted  from  the  French 
of  Louis  Desnoyehs.  By  James 
Buckland.  With  110  Illustratious  by 
Cecil  Aldin.     Crown  8vo,  6s. 


Crake  (Rev.  A.  D.). 

EDWY  THE  FAIR;  or.  The  First 
Chronicle  of  ^scenduue.  Crown  8vo, 
silver  top,  2s.  net. 

ALFGAR  THE  DANE  :  or.  The  Second 
Chronicle  of  iEscendune.  Crown 
8vo,  silver  top,  2s.  net. 

THE  RIVAL  HEIRS  :  being  the  Tliird 
and  last  Chronicle  of  iEscendune. 
Crown  8vo,  silver  top,  2s.  net. 

THE  HOUSE  OF  WALDERNE.  A 
Tale  of  the  Cloister  and  the  Forest  in 
the  Days  of  the  Barons'  Wars.  Cr. 
8vo,  silver  top,  2s.  net. 

BRIAN  FITZ-COUNT.  A  Story  of 
Wallingford  Castle  and  Dorchester 
Abbey.    Crown  8vo,  silver  top,  2s.  net. 


32    LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


Children's  Books — continued. 


Henty  (G.  A.).-Edited  by. 

YULE  LOGS  :  A  Story  Book  for  Boys. 

By   Various   Authors.      With   61 

Illustrations.     Cr.  8vo,  gilt  edges,  3s. 

net. 
YULE-TIDE   YARNS:   a  Story  Book 

for   Boys.      By  Various  Authors. 

With  45   Illustrations.      Crown   8vo, 

gilt  edges,  3s.  net. 

liang  (Andrew). — Edited  by. 

THE  VIOLET  FAIRY  BOOK.  With 
8  Coloured  Plates  and  54  other  Illus- 
trations.    Crown  Svo,  gilt  edges,  6s. 

THE  BLUE  FAIRY  BOOK.  With  138 
Illustrations.     Cr.  8vo,  gilt  edges,  6s. 

THE  RED  FAIRY  BOOK.  With  100 
Illustrations.     Cr.  8vo,  gilt  edges,  6s. 

THE  GREEN  FAIRY  BOOK.     With 

99  Illustrations.      Crown    8vo,    gilt 
edges,  6s. 

THE  GREY  FAIRY  BOOK.  With  65 
Illustrations.     Cr.  8vo,  gilt  edges,  6s. 

THE  YELLOW  FAIRY  BOOK.  With 
104  Illustrations.  Crown  8vo,  gilt 
edges,  Qs. 

THE  PINK  FAIRY  BOOK.  With  67 
Illustrations.  Crown  8vo,  gilt  edges, 
6s. 

THE  BLUE  POETRY  BOOK.  With 

100  Illustrations.      Crown   8vo,   gilt 
edges,  6s. 

THE    TRUE    STORY    BOOK.     With 

66  Illustrations.       Crown    Svo,    gilt 
edges,  6s. 

THE  RED  TRUE  STORY  BOOK. 
With  100  Illustrations.  Cr.  Svo,  gilt 
edges,  6s. 

THE  ANIMAL  STORY  BOOK.     With 

67  Illustrations.       Crown    Svo,    gilt 
edges,  6s. 

THE  RED  BOOK  OF  ANIMAL 
STORIES.  Witli  65  Illustrations. 
Crown  Svo,  gilt  edges,  6s. 

THE  ARABIAN  NIGHTS  ENTER- 
TAINMENTS. With  66  Illustrations. 
Crown  Svo,  gilt  edges,  6s. 

THE  BOOK  OF  ROMANCE.  With 
8  Coloured  Plates  and  44  other 
Illustrations.     Cr.  Svo,  gilt  edges,  6s. 


Lyall.— THE  SURGES  LETTERS:  a 
Record  of  Child  Life  in  the  Sixties.  By 
Edna  Lyall.  With  Coloured  Frontis- 
piece and  8  other  full-page  Illustrations 
by  Walter  S.  Stagey.  Crown  8vo, 
2s.  M. 

Meade  (L.  T.). 
DADDY'S  BOY.     With  8  Illustrations. 

Crown  Svo,  gilt  edges,  3s.  net. 
DEB  AND  THE  DUCHESS.     With  7 

Illustrations.     Crown  Svo,  gilt  edges, 

3s.  net. 
THE   BERESFORD   PRIZE.     With  7 

Illustrations.     Crown  Svo,  gilt  edges, 

3s.  net. 
THE  HOUSE  OF  SURPRISES.     With 

6  Illustrations.    Crown  Svo,  gilt  edges, 

3s.  net. 

Murray.— FLOWER  LEGENDS  FOR 
CHILDREN.  By  Hilda  Murray 
(the  Hon.  Mrs.  >Idrray  of  EUbank). 
Pictured  by  J.  S.  Eland.  With 
numerous  Coloured  and  other  Illustra- 
tions.    Oblong  4to,  6s. 

Penrose.— CHUBBY  :  A  NUISANCE. 
By  Mrs.  Penrose.  With  8  Illustrations 
by  G.  G.  Manton.      Crown  Svo,  3s.  M. 

Praeger  (Rosamond). 
THE      ADVENTURES       OF      THE 
THREE  BOLD  BABES  :    HECTOR, 
HONORIA  AND  ALISANDER.    A 

Story  in  Pictures.  With  24  Coloured 
Plates  and  24  Outline  Pictures. 
Oblong  4to,  3s.  &d. 
THE  FURTHER  DOINGS  OF  THE 
THREE  BOLD  BABES.  With  24 
Coloured  Pictures  and  24  Outline 
Pictures.     Oblong  4to,  3s.  Qd. 

Roberts.— THE  ADVENTURES  OF 
CAPTAIN  JOHN  SMITH  :  Captain  of 
Two  Hundred  and  Fifty  Horse,  and 
sometime  President  of  Virginia.  By 
E.  P.  Roberts.  With  17  Illustrations 
and  3  Maps.     Crown  Svo,  5s.  net. 

Stevenson.— A  CHILD'S  GARDEN 
OF  VERSES.  By  Robert  Louis 
Stevenson.    Fcp.  Svo,  gilt  top,  5s. 

Tappan.— OLD  BALLADS  IX  PROSE. 
By  Eva  March  Tappan.  With  4  Illus- 
trations by  Fanny  Y.  Cory.  Crown 
Svo,  gilt  top,  4s.  Qd.  net. 


LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS.     33 
Children's  Books — continued. 


Upton  (Flokknce  K.  and  Bertha). 

THE  ADVENTURES  OF  TWO  DUTCH 
DOLLS  AND  A  'GOLLIWOGG'. 
With  31  Coloured  Plates  and  numerous 
niustrations  in  the  Text.  Oblong  4to, 
65. 

THE  GOLLIWOGG'S  BICYCLE 
CLUB.  With  31  Coloured  Plates 
and  numerous  Illustrations  in  the 
Text.     Oblong  4to,  6s. 

THE  GOLLIWOGG  AT  THE  SEA- 
SIDE. With  31  Coloured  Plates  and 
numerous  Illustrations  in  the  Text. 
Oblong  4to,  6a\ 

THE  GOLLIWOGG  IN  WAR.  With 
31  Coloured  Plates.     Oblong  4to,  6s. 

THE  GOLLIWOGG'S  POLAR  AD- 
VENTURES. With  31  Coloured 
Plates.     Oblong  4to,  ^s. 


Upton  (Florence  K.  and  Bertha) — 

continued. 

THE  GOLLIWOGG'S  AUTO-GO- 
CART.  With  31  Coloured  Plates 
and  numerous  Illustrations  in  the 
Text.     Oblong  4to,  6s. 

THE  GOLLIWOGG'S  AIR-SHIP. 
With  31  Coloured  Pictures  and 
numerous  Illustrations  in  the  Text. 
Oblong  4to,  6a'. 

THE  VEGE-MEN'S  REVENGE.  With 
31  Coloured  Plates  and  numerous  Illus- 
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34     LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


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LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS.     35 


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LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS.    37 


Fine  Arts  and  Music — continued. 


Huish,   Head   and  Longman.—  ] 
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8vo,  12s. 


Morris  (William). 

ARCHITECTURE,  INDUSTRY  AND 
WEALTH.  Collected  Papers.  Crown 
8vo,  6s.  net. 

HOPES  AND  FEARS  FOR  ART.  Five 
Lectures  delivered  in  Birmingham, 
London,  etc.,  in  1878-1881.  Crown 
8vo,  4s.  Qd. 

AN  ADDRESS  DELIVERED  AT  THE 
DISTRIBUTION  OF  PRIZES  TO 
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HAM MUNICIPAL  SCHOOL  OF 
ART  ON  21ST  FEBRUARY,  1894. 
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SOME  HINTS  ON  PATTERN -DE- 
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ARTS  AND  ITS  PRODUCERS  (1888) 
AND  THE  ARTS  AND  CRAFTS  OF 
TO-DAY  (1889).     8vo,   2s.   &d.   net. 

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ARTS  AND  CRAFTS  ESSAYS  BY 
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*,*  For   Mr.    William  Morris's    other 
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38    LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


The  Fine  Arts  and  Music — continued. 


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Wellington.— A  DESCRIPTIVE  AND 
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Baring-Gould.— CURIOUS  MYTHS 
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MENTS OF  GREAT  BRITAIN.  By 
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Captain  H.  M.  Bower.     Svo,  15».  n«t. 


LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL  WORKS.     39 


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MEANINGS.  By  Horace  G.  Hutchin- 
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Jeflferies  (Richard). 
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tions from  Photographs.  Svo,  10s.  6d. 
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Johnson  (J.  &  J.  H.). 

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OF  IRISH  NAMES  OF  PLACES.  By 
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Iiang  (Andrew). 

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GHOSTS.     Crown  Svo,  3s.  6d. 


Cr. 

the 
tha 


Maryon.  —  HOW  THE  GARDEN 
GREW.  By  Maud  Maryon.  With  4 
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Matthews.— NOTES  ON  SPEECH- 
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Max  MiiHer  (The  Right  Hon.  F.). 
COLLECTED  WORKS.     18  vols. 

Svo,  OS.  each. 

Vol.    I.    Natural   Religion  : 
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Vol.   II.    Physical   Religion  : 
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Vol.  III.  Anthropological  Reli- 
gion :    the  Gifford  Lectures,  1891. 

Vol.  IV.  Theosophy  ;  or.  Psycholo- 
gical Religion  :  the  Gifford  Lectures, 
1892. 

Chips  from  a  German  Workshop. 

Vol.  V.   Recent  Essays  and  Addresses. 

Vol.  VI.     Biographical  Essays. 

Vol.  VII.  Essays  on  Language  and 
Literature. 

Vol.  VIII.  Essays  on  Mythology  and 
Folk-lore. 


Vol.  IX.  The  Origin  and  Growth 
OK  Religion,  as  illustrated  by  the 
Religions  of  India  :  the  Hibbert 
Lectures,  187S. 

Vol.  X.  Biographies  of  Words,  and 
the  Home  of  the  Aryas. 

Vols.  XI.,  XII.  The  Science  op 
Language  :  Founded  on  Lectures 
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Vol.  XIII.  India  :  What  can  it  Teach 
Us! 

Vol.  XIV.  Introduction  to  the 
Science  of  Religion.  Four  Lec- 
tures, 1870. 

Vol.  XV.  RAMAKif/SHiVA  :  his  Life 
and  Sayings. 

Vol.  XVI.  T  'REE  Lectures  on  the 
Ved.Inta  Philosophy,  1894. 

Vol.  XVII.  Last  Essays.  First 
Series.  Essays  on  Language,  Folk- 
lore,'etc. 

Vol.  XVIII.  Last  Essays.  Second 
Series.  Essays  on  the  Science  of 
Religion. 


40    LONGMANS  AND  CO.'S  STANDARD  AND  GENERAL   WORKS. 


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Milner.  —  COUNTRY  PLEASURES  :  ,  Southey.  — THE  CORRESPONDENCE 
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Garden.  By  George  Milneb.  Crown  CAROLINE  BOWLES.  Edited  by 
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Morris.— SIGNS  OF  CHANGE.  Seven 
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Parker  and  Unwin.— THE  ART  OF 
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68  Full-page  Plates.     8vo,  10s.  M.  net. 

Pollock.— JANE  AUSTEN  :  her  Con- 
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Poore  (George  Vivian,  M.D.). 

ESSAYS  ON  RURAL  HYGIENE. 
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THE  EARTH  IN  RELATION  TO 
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Royal  College  of  Physiciaus  in  1899, 
together  with  other  Papers  on  Sauita- 
tion.  With  13  Illustrations.  Crown 
8vo,  5s. 

Rossetti.— A  SHADOW  OF  DANTE: 

being  an  Essay  towards  studying  Him- 
self, bis  World,  and  his  Pilgrimage. 
By  Maria  Francesca  Rossetti.  Crown 
8vo,  3s.  M. 

Shadwell.— DRINK  :  TEMPERANCE 

AND    LEGISLATION.      By    Arthur 

Shadwell,   M.A.,   M.D.      Crown  8vo, 

5s.  net. 
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z5,ooo/ii/o2. 


Stevens.— ON  THE  STOWAGE  OF 
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Thuillier.— THE  PRINCIPLES  OF 
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Turner    and    Sutherland.  —  THE 

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Warwick.— PROGRESS  IN  WOMEN'S 
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tess of  Warwick.    Crown  8vo,  6s. 

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Webb.— THE  MYSTERY  OF  WIL- 
LIAM SHAKESPP:ARE  :  a  Summary 
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Whittall.— FREDERIC  THE  GREAT 
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